An affordable franchising package pilot-tested by leading convenience store operator Philippine Seven Corp. (PSC)—one that requires only P300,000 in investment—has generated strong interest from Filipinos who want to run their own business.
Apart from expanding its franchising deals, PSC, the local franchisor of the 7-Eleven 24/7 convenience store chain, is continuing its nationwide expansion and is likely to hit close to 3,000 stores by the end of next year from 2,386 as of end-March this year.
But for some of its mature corporate-owned stores, PSC is offering a franchising arrangement wherein the franchisee could take over operations for only P300,000 in cash outlay and a commitment to directly manage the store in exchange for a fixed share of earnings, typically averaging at around 7 percent of sales.
The cash outlay is effectively a deposit that could eventually be returned—like a bond of commitment. The company waives utility charges but the franchisee shoulders the cost of labor and inventory losses.
“We have a long list of applications,” PSC president and chief executive officer Jose Victor Paterno said in a press briefing at the sidelines of the company’s annual stockholders meeting yesterday. “We’re going slow as we test it under fire. It’s a big change and we lock it under a three-year contract.”
PSC has so far awarded 80 of these low-capital franchising deals and expects to choose 100 more franchisees by the end of this year, Paterno said.
Under this franchising package, only one site is awarded per person, except for “exceptional performers,” Paterno said.
About 53 percent of PSC’s network represented franchised stores but earlier franchising packages required much higher capital.
PSC lowered the entry barrier for the latest franchising package, which, however, requires the franchisee to be hands-on in running store operations.
This year, PSC has budgeted P3.5 billion to support its store expansion strategy. The bulk of this amount is allocated to new store opening, store renovation and equipment acquisition.
Last year, PSC began its digital journey.
Its e-commerce platform CLiQQ Shop is now available in 1,700 stores in Luzon and will be rolled out to other parts of the country.
CLiQQ PAY, the company’s closed-loop wallet, was also soft-launched at the end of last year.
“We are not only capitalizing on revenue opportunities presented by the payment and logistics needs of digital players in an emerging market, but we are cautiously becoming a digital player ourselves, in the belief that a hitherto unproven model combining online and offline assets will result in a digital business ecosystem, with both low acquisition costs and superior unit economics, perhaps leading to entirely new businesses in the medium term,” Paterno said.
*This article was published on Philippine Daily Inquirer last July 20, 2018 and is available online at http://business.inquirer.net/254239/7-11-operator-expands-footprint