Franchising In The Philippines
By Armando Bartolome
Franchising has been in the Philippines for 94 years. With the entry of Singer
Sewing Machine in 1910 which introduced product distributorship. Numerous
companies embraced this concept as their vehicle for business expansion over the
years. From 1910 to 1965, businesses staked their flags in the Philippine
economy through PRODUCT DISTRIBUTORSHIP. Some of these multinationals were tire
and pharmaceutical companies.
The take off was slow in the early years as the succeeding companies like A&W
Restaurant known for its root beer entered in 1965. The first outlet was
established on Highway 54 (now popularly and historically known as Epifanio Delo
Santos Avenue or EDSA) near the Big Dome-Araneta Coliseum. The concept was a
drive-thru where women food attendants garbed in mini-skirts, black stockings
and in roller skates would serve customers inside the comfort of their cars.
Trays clamped by the side of the door and mugs with cold refreshing root beer
partnered with foot long hotdogs were served. Its set-up was exactly the same as
found in the US branches during those years. What this company brought was
another form of franchising, which is known as Business Format. From then
onwards most entrants into the market embraced this concept, in fact, so widely
used not only in the Philippines, but all worldwide.
Product Distributorship
This is a form of franchising where owners of products allow other parties to
sell or distribute their products or even use their trademark as a dealer. There
is minimal or no control of operations. The relationship is centered on the
quality of products sold.
Business Format
A form of franchising used by 90% of companies involved in franchising. This is
the reason why franchising is considered the most successful way of expansion
worldwide.
In business format, the franchisor, more than his registered trademark and
products, has developed a business system that is made available for use to
franchisees. Compliance to the business system is the core and essential element
of their contractual relationship embodied in a franchise agreement.
The first survey of franchising in the Philippines done in 1995 revealed that
there were a total of 50 operating foreign franchisors at that time. The success
rate of foreign franchisees is 97%. In 2003, there were 315 foreign franchisors
in the country with 87% success rate.
Philippine Based (Home-Grown) Franchises
Earliest recorded homegrown company that used business format franchising was
PANCAKE HOUSE. It was franchising since 1978. PANCAKE HOUSE is still active in
franchising and has transferred ownership a few years back.
In 1996, there were 94 companies using franchising as their route to expansion
and the number has substantially increased to 481 in 2003. The success rate is a
good 90%.
Philippine Franchise Scenario
Franchising in the country evolved from the US Franchise System. There are,
however, no laws that regulate franchising. Companies and franchise developers
use international franchise practices as reference and as a guide to pursuing
this type of business. The increasing number of homegrown companies using
franchising in their expansion can be attributed to the presence and increasing
number of foreign franchisors. They served as motivators and inspiration for the
local entrepreneurs.
Franchising for years has been the monopoly of food sector. It was only in
mid-1990's that service and retail entrepreneurs used franchising.
There was an absence of franchise education in the country for decades.
Franchise Conference and Seminars started only in the mid-90's. Franchise
Associations were also formed with the vision of professionalizing and
standardizing the franchising as well as police their own ranks.
Visit my web site at http://www.gmbfranservice.biz Armando together with his
spouse began their company called GMB Franchise Developers Inc., in the
Philippines in 1993. The company has since assisted over 200 various companies
expand via franchising within the country and international. Mr. Bartolome, is
the Philippines' acknowledged Franchise Guru and has given over 200 seminars in
the country, Asian Regions, Middle East and North America.