Tips and Traps

Franchising in the Philippines has never been bigger. Year on year, the industry grows exponentially. This is probably the reason why more and more people are investing in franchises rather than setting up new businesses that they start from the ground up.

Statistics indicate that the success rate in franchising is 90%. Traditional businesses, on the other hand, will give you a 25% chance of survival. While this points to the obvious that franchising is your best option in your dive into the ocean of entrepreneurship, you still here accounts of people that fail in their endeavors.
This is the 10% that is hardly spoken about. This is the 10% that shatters dreams. This is the 10% that leads to disillusionment. Do we now join the ranks of franchising’s naysayers and avoid the industry like a plague? Or do we arm ourselves with knowledge that will lead us to a point where we get to an informed decision with regard to franchising?
This article will be about the second option. We need to know what franchising’s obstacles are and how to hurdle them. Better yet, we will show you what they are so that you can avoid them altogether. We’ll point out the traps. We’ll give you the tips. Hopefully all of us will be wiser because of this.

TRAP # 1 – Franchising is easy.
Most people will think that getting a franchise is easy. All you have to do is pay the fees, go through training and voila!, you have an instant business. While it is true that you get a head start in whatever business you got into because of the systems that your franchisor already has in place, this doesn’t mean that it’s going to be a walk in the park. Your brand needs commitment. And this means hard work on your part.
To illustrate what I mean, take employment, for example. You go to work Monday to Friday, 9 to 5. You get to keep your weekends for yourself. Just do your job properly and perform, you’ll be getting your salary every 15th and 30th of the month, guaranteed.
When you get into franchising, your concerns for your business now become 24/7 concerns. You’ll have to put in longer hours. You cannot just shut down and come back the following day. You have to give your business its due attention. You have to be hands-on. And while all of these are happening, you’re not quite sure if you’ll be getting anything in the form of salaries since you’re just starting your business.

TIP: Do a self-assessment.
Do a self-check when considering getting a franchise. Can you work well into the night? Do you have energy for this endeavor? Are you willing to go 24/7 for your business?
You have to answer these questions and it has to be very clear to you that you are ready and committed to running a business.

TRAP # 2 – Franchising means instant success.
Nothing could be further from the truth! A lot of us will think that just because we see a lot of outlets of a particular brand, getting a franchise and operating the outlet will get you tons of money. Sure, you see these branches serving lots of customers, churning out huge sales and basically doing good business. You might have gone to the outlet during peak hours and ended up thinking that that was how they performed for the whole day. On this, you have to go beyond that initial impression.
We mentioned earlier that franchising is a lot of work. What people sometimes fail to realize is that it also takes time to make a concept work. You have to put in the hours, be hands-on and mindful of your operations.

TIP: Study the concept.
Go around and visit the stores. If at all possible, talk to existing franchisees. Visit during different times of the day to see how well they sell at that particular time. You’ll get a clearer picture of your intended business if you do it this way.
It will also get you grounded to the reality that peak hours do not last the whole day. That’s fine, all business operate that way. But it would be to your advantage if you are clear on this from the very beginning.

TRAP # 3 – I can operate my franchise anywhere.
We see restaurant outlets all over the city. We even see them in the provinces. The same thing goes for other retail and service concepts. But what might have gotten you interested in franchising are the small carts or kiosks. Let’s discuss this a bit more as this a great example why some concepts cannot just be opened anywhere and everywhere.
As an example, let’s say you got interested in a cart concept that serves cold mixed drinks. This was a couple of months back at the start of summer season. The franchisor was able to expand very fast due to the high demand for their products. Stores were opening left and right.
Having seen this, you applied for a franchise thinking that you would do good business in front of your house. You won’t be paying rent for the space and you wouldn’t have to hire anyone since your siblings can operate the store while they are on summer break. But you failed to do any feasibility analysis. You’ll be saving a lot on operating expenses for sure, but do you have enough people in your area who will buy your product? Are you in a high traffic densely populated area?

TIP: Do a market study.
Check your demographics. Check if there are enough possible customers in the area. Know the busiest times of the day. Verify if your target customers can afford your products. Get these done and you’ll have a better feel for your brand.

TRAP # 4 – I have to sign up right away.
I’ve seen a few franchisors get creative with their franchise sales. They offer huge discounts on franchise fees if you sign up with them right away. On your end, it may seem harmless. You’ll get a huge amount in savings and will get a business right away.
There’s nothing wrong with that per se but in this situation, you might be getting the short end of the stick. Why? By signing right away, you might have not gotten the chance to review the business properly. You may get to sign the franchise agreement without having gone through all of the provisions. What could these result in?
A bad investment, for starters. A discount upfront does not necessarily mean you got a good deal. You may have saved on the franchise fee but since you didn’t get to review the business, you failed to notice that you’re products have very short expiry periods. Or that your rent is too high. You might end up owning a business with very high costs with very slim margins.
In addition to this, by signing up right away, you may have inadvertently agreed to some provisions in the franchise agreement that you are totally opposed to. Not having the time to review the document may be a source of conflict in the future.

TIP: Take your time and review, review, review.
Don’t be in a rush to get a franchise. Don’t base it solely on the promise of good discounts. Do your numbers. Read the franchise agreement. Consult a lawyer if you have to. The point I’m making here is that you should be cautious while you are searching for the best franchise for you. In the end, you’ll end up happy knowing that you made the right decision.
These are just some realities people go through in their search for their dream franchise. There may be more but the points discussed above, I believe, are the most important and relevant issues that everyone should tackle in their franchise search.
I encourage everyone to shop around for your desired franchise. Don’t rush. Do your research and review all materials and documents. Go through this exercise and you’ll be on your way to getting the best franchise for you.