Proudly Pinoy - Planters Development Bank

FRANCHISING
Profitable business. From humble street carts to modular kiosks in upscale malls.
One major mall has a policy requiring
employees of any kiosk and cart to remain
standing during store hours. To discourage
sitting, the storage box behind the cart is
set to a specific height with the cover rising
to an apex. So, as an operator of a mallbased
retailer, you must inform prospective
employees of this work situation.
Another alternative to getting into a
cart and kiosk business is via franchising.
The growth for food businesses has been
on an increasing rate from a handful in
the early 70’s to over 300 franchisors. The
concept runs from dimsum, rice topping,
pao, ice cream, peanuts, etc. There are also
non-food carts and kiosks selling beauty
products, perfume, key duplication, picture
frames, etc.
Challenges
Those operating food kiosks and carts face
more challenges. Take for example my client
who had difficulties getting his popcorn
business into the malls. His applications
were being turned down because his
operations required open flame, which
mall administrators consider a hazard. Of
secondary concern were limited storage
facilities, which required restocking the kiosk
with fresh supplies on a regular basis.
Thinking outside the box, my advice was
for my client to pick a central location that
could serve as the company kitchen. There,
freshly-popped corn could be packed and
delivered to the surrounding malls. Bingo!
Using this scheme, his brand of popcorn is
now everywhere in the metropolis and is
even sold in gasoline stations.
Franchising has its advantages.
Foremost is saving yourself the costly trialand-error
route by adopting the model that
your franchisor built from experience and
experiments. Another advantage is brand
equity. A franchise business has easy recall,
especially when the franchise already has
an extensive branch network. A consumer
is more likely expected to patronize a brand
than an independent local business. The
primary reason for this buying behavior is
a perceived consistency in the product and
service, which is the hallmark of responsible
franchising. A responsible franchisor will
provide franchisees with continuous support
in the form of research and development,
training and promotions.
Investment
The investment in a franchise carts and
kiosk is quite affordable, ranging from
P150,000 to around 500,000. This includes
the equipment, build out cost and franchise
fee. The typical franchise term averages 5
years and is renewable.
To sustain support for the franchise,
service fees are also collected, for example,
as a percentage of gross sales. The
average nowadays is 5%, which is paid to
the franchisor. Under the terms of some
franchise agreements, certain items are
proprietary and can only be supplied by the
franchisor.
My studies indicate that payback, which
is the return of the investment for carts and
kiosks averages 18 months to two years.
This means that with a 5 year franchise
term, the franchisee gets the investment
back in less than half the period and the
rest is profit.
Getting the right franchise business
spells having a healthy business relationship
between the franchisor and franchisee.
Watch out for franchisors that make verbal
promises and not found written in the
franchise agreement. These are scam
franchise businesses. Their claims are
empty promises.
Armando “Butz” O. Bartolome is
the president of GMB Franchise
Developers, Inc., the company
he set up in 1993. With more
than 30 years of field experience
in franchising, training and
marketing, Mr. Bartolome has
been acknowledged as the
country’s franchise guru. He
is a member of the SME.Com.
Ph panel of business experts
and can be reached by e-mail at franchiseconsultants@
gmail.com , telephone (63 2) 532-8386 or at the blogspace:
franchiseguruphilippines.blogspot.com.
15
VOL. NO. 03 / ISSUE NO. 04