The world economy in turmoil
Things are getting worse for the Philippine economy. This is what anyone can surmise if you look at the GDP growths forecasts from various groups. Early in the year we got low but encouraging forecasts averaging 2.7%. The latest forecast by Fitch Ratings, though, pegs the country’s GDP growth at 0.5%.
The OFW remittance, the economy’s knight in shining armor, on the other hand, is already showing chinks in its armor with the global economic crisis still cutting down jobs relentlessly. And since remittances contribute more than 10% to the GDP and sustain many Filipinos since OFWs support their extended families as well, the effects of the global financial crisis can be quite staggering.
There is no denying that the world economy is in turmoil and the Philippines is not immune to it. The earlier we accept it the better for us so that we can act accordingly and move forward.
Why this happened?
But before we move on, it is also good to know why the world economy took a nosedive. The complexities of the modern economy compel many pundits to simplify things by pointing to greed as the culprit; but to clarify and simplify things even more, it is because our economic system it encourages and rewards greed instead of hard work and innovation.
If the system promotes greed, then investments will always go to high yielding yet high-risk schemes, which are not really sustainable. Money is poured on a piece of paper that promises big returns rather than on brick and mortar businesses that open opportunities to many. How can you make money by lending more to people who cannot pay their debt? But this was what US banks did which resulted into the subprime mortgage crisis and eventually led to the global financial meltdown.
Time to get real
What we need, therefore, is a reorientation of investment priorities. And this means investing or funding concrete businesses that produce real goods and employ real people. It’s time to get real, folks!
Of course, going into business during difficult times goes against common sense. When the economy goes south, instinct will tell you to hold on to your money and wait things out. But that is only because instinct’s main task is survival, which may not be enough in today’s cutthroat business environment. What a businessman needs to do is not just to survive but to triumph. To survive means finishing a marathon; to triumph means winning the race.
Franchising will help you win the race because it is recession resistant. In fact, an economic downturn might even help franchising.
The franchise advantage
How? In these times of downsizing and layoffs, many people with management experience are looking for new careers. These are the perfect candidates for franchisees that can make a franchise grow.
Using the time, resources and network of the franchisee, the franchisor can expand his business. The franchisee, in turn, is given a means of livelihood. It is basically a win-win situation.
That is why the government is encouraging entrepreneurship in this time of crisis. The drawback here is that not everyone is cut out to be an entrepreneur. But being a franchisee is not strictly being an entrepreneur. It is more of being a manager, which is what he was before getting retrenched. But this time, he is his own boss. It’s basically being an entrepreneur without the major headaches.
Kick-starting the economy via franchising
Franchising can help create thousands of businesses and millions of jobs. It already has despite limited support from government and financing sectors. Imagine what it can do if it is given the environment where it can reach its full potentials.
Malaysia, with its franchise-friendly policy, is using franchising as an instrument for SME development and to broaden its middle class (bumiputra). A strong middle, after all, helps in the stability of the nation. Malaysia is also seen as an attractive destination for foreign investors because of this policy.
Now this is where the government can really help. If the government is encouraging entrepreneurship to fight the crisis, it should put its money where its mouth is. We do not need a stimulus package here; just the wise implementation of present laws.
The Magna Carta for MSMEs provides that banks should allocate 2% and 8% of its loan portfolio to micro and small and medium enterprises respectively. If I may put forward a proposition, I would like to see banks allot part of this 10% portfolio for a window dedicated to franchise financing. This can help the Philippines get out of the woods quicker than the rest.
This can be done
Understandably, banks may be hesitant to let go of their cash after being burned with the crisis. Let me say, however, that franchising is worth investing.
This already happened in the US during the 1950s when many companies started franchising, many of which became well-loved global brands like 7-Eleven, Burger King, Holiday Inn, Dunkin Donuts, McDonald’s, Wendy’s and many others. But what made the franchising boom were the returning GIs, who used their GI loans to invest on a franchise. From only 100 franchise companies in 1950, these grew to more than 900 franchise companies producing 200,000 businesses by the end of the decade. This was the time when the US became the global leader in the world economy. In the latest survey, franchising in the US is producing more than 900,000 businesses, generating more than 11,000,000 jobs.
In the ASEAN region, the Philippines leads in the number of franchise concepts and outlets. We have what it takes to bring the country to unprecedented growth. All we need is a little push.
The possibilities
There are about 1,000 franchise concepts creating about 100,000 outlets and generating about 1,000,000 jobs in the country today – and there is still much room for us to grow. We must remember that we are strategically placed as the gateway to Asia. Coupled with our natural flair for the service industry, we have what it takes to become the franchise hub of Asia, serving the 600 million ASEAN market – and even the 1.6 billion and 1.8 billion South Asian and East Asian markets, respectively.
Back in the 50s up to the early 70s, the Philippines led its neighbors in virtually every aspect – agriculture, aquaculture, education, infrastructure and even the economy. All of these have slipped from our hands, except in the area of franchising… for now.
Things are getting worse for the Philippine economy. This is what anyone can surmise if you look at the GDP growths forecasts from various groups. Early in the year we got low but encouraging forecasts averaging 2.7%. The latest forecast by Fitch Ratings, though, pegs the country’s GDP growth at 0.5%.
The OFW remittance, the economy’s knight in shining armor, on the other hand, is already showing chinks in its armor with the global economic crisis still cutting down jobs relentlessly. And since remittances contribute more than 10% to the GDP and sustain many Filipinos since OFWs support their extended families as well, the effects of the global financial crisis can be quite staggering.
There is no denying that the world economy is in turmoil and the Philippines is not immune to it. The earlier we accept it the better for us so that we can act accordingly and move forward.
Why this happened?
But before we move on, it is also good to know why the world economy took a nosedive. The complexities of the modern economy compel many pundits to simplify things by pointing to greed as the culprit; but to clarify and simplify things even more, it is because our economic system it encourages and rewards greed instead of hard work and innovation.
If the system promotes greed, then investments will always go to high yielding yet high-risk schemes, which are not really sustainable. Money is poured on a piece of paper that promises big returns rather than on brick and mortar businesses that open opportunities to many. How can you make money by lending more to people who cannot pay their debt? But this was what US banks did which resulted into the subprime mortgage crisis and eventually led to the global financial meltdown.
Time to get real
What we need, therefore, is a reorientation of investment priorities. And this means investing or funding concrete businesses that produce real goods and employ real people. It’s time to get real, folks!
Of course, going into business during difficult times goes against common sense. When the economy goes south, instinct will tell you to hold on to your money and wait things out. But that is only because instinct’s main task is survival, which may not be enough in today’s cutthroat business environment. What a businessman needs to do is not just to survive but to triumph. To survive means finishing a marathon; to triumph means winning the race.
Franchising will help you win the race because it is recession resistant. In fact, an economic downturn might even help franchising.
The franchise advantage
How? In these times of downsizing and layoffs, many people with management experience are looking for new careers. These are the perfect candidates for franchisees that can make a franchise grow.
Using the time, resources and network of the franchisee, the franchisor can expand his business. The franchisee, in turn, is given a means of livelihood. It is basically a win-win situation.
That is why the government is encouraging entrepreneurship in this time of crisis. The drawback here is that not everyone is cut out to be an entrepreneur. But being a franchisee is not strictly being an entrepreneur. It is more of being a manager, which is what he was before getting retrenched. But this time, he is his own boss. It’s basically being an entrepreneur without the major headaches.
Kick-starting the economy via franchising
Franchising can help create thousands of businesses and millions of jobs. It already has despite limited support from government and financing sectors. Imagine what it can do if it is given the environment where it can reach its full potentials.
Malaysia, with its franchise-friendly policy, is using franchising as an instrument for SME development and to broaden its middle class (bumiputra). A strong middle, after all, helps in the stability of the nation. Malaysia is also seen as an attractive destination for foreign investors because of this policy.
Now this is where the government can really help. If the government is encouraging entrepreneurship to fight the crisis, it should put its money where its mouth is. We do not need a stimulus package here; just the wise implementation of present laws.
The Magna Carta for MSMEs provides that banks should allocate 2% and 8% of its loan portfolio to micro and small and medium enterprises respectively. If I may put forward a proposition, I would like to see banks allot part of this 10% portfolio for a window dedicated to franchise financing. This can help the Philippines get out of the woods quicker than the rest.
This can be done
Understandably, banks may be hesitant to let go of their cash after being burned with the crisis. Let me say, however, that franchising is worth investing.
This already happened in the US during the 1950s when many companies started franchising, many of which became well-loved global brands like 7-Eleven, Burger King, Holiday Inn, Dunkin Donuts, McDonald’s, Wendy’s and many others. But what made the franchising boom were the returning GIs, who used their GI loans to invest on a franchise. From only 100 franchise companies in 1950, these grew to more than 900 franchise companies producing 200,000 businesses by the end of the decade. This was the time when the US became the global leader in the world economy. In the latest survey, franchising in the US is producing more than 900,000 businesses, generating more than 11,000,000 jobs.
In the ASEAN region, the Philippines leads in the number of franchise concepts and outlets. We have what it takes to bring the country to unprecedented growth. All we need is a little push.
The possibilities
There are about 1,000 franchise concepts creating about 100,000 outlets and generating about 1,000,000 jobs in the country today – and there is still much room for us to grow. We must remember that we are strategically placed as the gateway to Asia. Coupled with our natural flair for the service industry, we have what it takes to become the franchise hub of Asia, serving the 600 million ASEAN market – and even the 1.6 billion and 1.8 billion South Asian and East Asian markets, respectively.
Back in the 50s up to the early 70s, the Philippines led its neighbors in virtually every aspect – agriculture, aquaculture, education, infrastructure and even the economy. All of these have slipped from our hands, except in the area of franchising… for now.
The future is in our hands.
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