"2007 Franchisee of the Year" Shares His Secret to Success

Franchising is all about duplicating a successful business. This means when one gets a franchise, you don’t have to start from scratch. No more groping in the dark. No need for the trial-and-error phase associated with most start-ups. All that the franchisee has to do is to follow the manual provided by the franchisor. If he does this, the franchisee is assured of a very high success rate – about 80 to 90%.

It was this high success rate that attracted Mr. Vinzent Thel Querol to franchising. At that time, he had already been into pawnshop and rice retailing businesses for years, but seeing that franchising could be a promising addition to his enterprises, the seasoned businessman set his sight on getting a 7-Eleven franchise.

He chose 7-Eleven because it is a global brand and is, in fact, the global icon of convenience. Upon closer scrutiny, Vinzent was also pleasantly surprised that 7-Eleven offered an operations program that will keep him ahead of the competition. In May 2004, Vinzent opened his first 7-Eleven store in Fields Avenue, Angeles City, Pampanga.

Pretty soon, Vinzent was able to open 3 more stores – in Bulacan, Quezon City and another one in Angeles City. And the amazing thing is these stores were opened using earnings from shops already in operation.

And the secret to Vinzent’s success… a close working relationship with the franchisor. After all, the franchisor knows what’s best for the business. And the success of the business is a shared interest and goal for both franchisor and franchisee. It is no wonder then that franchising is often compared to a marriage. And to cement and institutionalize this franchisor-franchisee relationship, he co-pioneered the formation of 7-Eleven’s Franchise Council, the first council of its kind outside the U.S.

Because of this close working relationship, Vinzent’s stores are ace performers, which make him a frequent awardee of the company’s sales and service excellence awards. The opportunity to give back to society, however, is what he sees as his greatest reward. Tucked under his belt are various programs such as sidewalk-clearing cooperation with local government units, hiring working students as company scholars, and the Plastic on Demand Project aimed at lessening the use of plastic bags.

Lastly, having franchise also comes with a bonus. Vinzent admits that franchising has introduced him to other ways of operating a business through the company’s best practices, which he adapted to his other businesses. Now, his other entrepreneurial endeavors are also doing very well… thanks to franchising.

TEN BIG Reasons Why A Franchise is a Better Investment*

*”Ten Big Reasons Why A Franchise is A Better Investment” is an excerpt from “A Guide to Franchising in the Philippines” by the Philippine Franchise Association (PFA). The book was created to provide essential information in franchising being the most innovative business growth strategy that has since achieved world-class status. Aside from explaining franchising in the context of the Filipino experience, this book features 15 Filipino franchise experiences by remarkable individuals who boldly took on the franchising challenge and succeeded.

One: Business 101

Even if you earned your college degree in something as unrelated to business as Afghan Literature, you may still be qualified to become a franchisee. For most franchisors, the franchisee need not have previous experience in business or in the product or service sold by the franchise company. Franchisors will teach you everything you need to know about running the store. A franchise training program will usually cover areas of marketing, accounting, finance, government relations, and probably even the rudiments of production management. If you skipped classes during those training days, on-the-job experience will take care of business training for you. Managing a franchise is a crash course in running a business.

Two: Your Own Boss

If you invest in a franchise, even if it is a business selling food items from a small cart with a total sales force of one employee, being a franchisee will earn you the title of President or CEO of your company. Putting your money in real estate or in any other financial instrument, no matter how large an amount you invest, will not give you the title of CEO. More importantly, as CEO of your company, you are responsible for the overall direction and well being of your business. Although you comply with the standards of quality and service set by the franchisor, essentially, you are your own boss.

Three: Instant Customers

With an established franchise name and trademark, a franchise business is guaranteed patronage of its products or services from customers who already know the brand. A startup business will have to spend time and money in advertising, promotions, and customer goodwill for its new name to be recognized, yet with a franchise, all you need is to set up the business, open it, and people will start coming. They are already familiar with your product, your service, your price, and the ambiance of your franchise before they even enter your establishment.

Four: Re-saleability of the Franchise

What if your green card was approved and you had to pack your bags and migrate to the US? A typical franchise agreement will allow you to sell your franchise to another franchisee or even to the franchisor himself. A franchise business can usually be resold based on the strength of the brand. If you were running your own startup business bearing your own name, reselling that business will be comparably more difficult. Which will you be more confident to buy or sell—Juan’s Chicken House or Jollibee?

Five: Business Consultants at Your Disposal

Part of the commitment of the franchisors to you as franchisee is to provide you assistance in marketing, finance, sales, accounting, and inventory management. The franchisor’s personnel are business consultants at your disposal, usually minus the exorbitant hourly fees.

Six: Proven Business System

If you were to put up your own business from scratch, you may end up spending many hours trying to perfect your business system. Questions like, “How long should I cook the hamburger? Which supplier offers the best terms? Is my brother-in-law qualified to do my bookkeeping, having spent three semesters mastering Basic Accounting? Sometimes, the money wasted from trial and error is enough to run your startup business.

A franchise normally offers a standardized, tested, well-thought out set of rules and procedures which help ensure the accurate and efficient operations of your business. These are all detailed in the franchisor’s operations manual. Virtually a franchise takes away all the guesswork in running a business and provides franchisees a doable, successful, and teachable system which you can adopt and work on.

Seven: Pooled National Advertising and Marketing Program

The success of a franchise business relies heavily on name recognition. This entails making products or services a household name. A franchise system requires franchisees to pool funds for national advertising and public relations purposes. Franchisees contribute a small percentage of their sales to a marketing and advertising fund which the franchisor uses for print/radio/TV/billboard advertising, promotional materials, point of sales, and other similar collaterals needed to promote the brand and increase the overall sales performance of each franchise unit. A pooled advertising program allows franchisees to get the most from their advertising budget.

Eight: Active Investment

A franchise is not a passive investment. Franchisors typically require their franchisees to be involved in running the business on a day-to-day basis. Unlike real estate and time deposits, franchising allows you to work on your investment to earn more. While real estate is dependent on market value, your earnings in a franchise depend on the efforts you put into your business including sales, marketing, and promotion.

Nine: Purchasing Power

Collective purchasing power is one of the best advantages of buying into a franchise. Everything in the business—from equipment to inventory—can be purchased by the franchisee from the franchisor or their approved suppliers at group discount, somewhat like a wholesaler’s price.

In fact, for franchisees involved in a product business, collective purchasing reduces their cost of goods by 10 to 20% and affords those savings that often exceed the royalty fees they pay. For service franchises, collective purchasing allows franchisees to get better and cheaper equipment that can help them do their business the less expensive, faster, and better way.

Ten: More Chances for Success, Less Risks of Failure

As an investment alternative, franchising is less risky and potentially more rewarding than many other investments. Franchising has a proven success rate of 90%.

In recent years, Filipino entrepreneurs have learned that rather than start their own business from scratch with a failure rate of 75% in a five-year period, it is better to invest in a franchise, where he reduces risk of failure to 10%.

A franchise also enjoys a better, if not higher profitability, compared to stocks or your own business startup because the business revolves around a successful and proven track record, sales and operations, which will not likely fail.

Owning a franchise also allows you to enjoy the product of your franchised business. There are many people who invested in a franchise so they can have hot oil treatment in the privacy of their own salon, or have a restaurant they can hold their parties in. Your stock market or T-bill investment cannot say as much.

Frequently Asked Questions in Franchising

1. How is franchising as a business?

Franchising is a business method that makes things easier for the entrepreneur and minimizes his risks.

A new entrepreneur, for example, can start a business with lesser risk and lesser capital if he gets a franchise. A franchise comes with an operating manual that serves as a blueprint to success for the franchisee. Aside from this, a franchisee gets support from his franchisor in terms of training, marketing and etc. Furthermore, since he will invest on a brand that has already been on the market for quite some time, he won’t have a hard time breaking into the market compared with starting a business on his own.

For a franchisor, franchising allows his to expand his business faster and easier through the resources and network of the franchisee.

In the Philippines, how popular is franchising for business owners to venture on it as a way to expand their business?

Back in the 80s, there were probably only about 50 franchises in the country. Most of these were large businesses. In the mid-90s, at the time PFA was founded, there were only about 100 franchises; and most were still large companies. Seeing that franchising can be a powerful tool for economic development, the PFA promoted franchising to businessmen and entrepreneurs as a means to expand ones business. Today there are about 1000 franchises creating about 100,000 businesses, with a good mix of large, medium, small and even micro enterprises.


2. How’s the Philippine franchise industry doing today? Is it affected by the ensuing global economic downturn?

The Philippine franchising sector continues to grow despite the global financial slowdown. In fact, many franchise companies are still pushing through with their expansion program despite the times.

To fully grasp the reason why franchising continues to grow despite the bad economy, we should revisit the meaning of franchising.

Franchising is replicating a successful business. A successful business means it excels in all areas – branding, products, systematization and most importantly, business ethics. All these will make a business tide through any storm. And all these make it an ideal business investment.

That is why, when the economy goes south, a franchise can still afford to expand because it will continue to attract franchisees. These are people who have either lost their jobs or can’t find a good job. There are also those who have realized that going into business is the best way to invest their hard-earned money.

Furthermore, the global economic downturn offers a valuable lesson for all of us – that is, we must learn to reorient our investment priorities.

The global financial meltdown happened because investors put priority on hifalutin, get rich quick schemes, when money should rather be channeled to endeavors that create enterprises and generate employment. I hope that banks will now prioritize lending to brick and mortar businesses – especially franchises, which has a high success rate.

3. What do you think are the pros and cons of franchising?

The advantages and disadvantages of franchising stems from the unique feature of franchising, which puts prime concern on the partnership between the franchisor and the franchisee.

The franchisor-franchisee relationship is an evolving relationship which starts as a sort of parent-child relationship and which culminates to a bond comparable to that of marriage.

It is important, therefore, for both parties to play their part. A franchisor must guide, mentor and take care of its franchisee, especially during the early years. Similarly, the franchisee must allow itself to be guided by its franchisor. He cannot just implement his own plans but rather follow the rules laid down by his franchisor.

For this reason, perhaps, franchising can be quite constricting and limiting for some individuals.

4. Would you know how many franchise industry players—both foreign- and Filipino-owned—in the country today?

According to a study commissioned by the PFA, there are about 680 Filipino franchises and 320 foreign concepts in the country today.

The Philippine Franchise Association (PFA) is an internationally recognized association of franchisors. It is the voluntary self-regulating governing body for franchising in the country and is the country’s pioneer and largest franchise association with members ranging from micro to large – homegrown and international – involved in food, retail, service and other types of business.

PFA members – numbering presently at 196 – are bound by the Fair Franchising Standards (FFS). By adhering to this Code of Ethics, the PFA members commit themselves to respect and to apply fair set of provisions in the conduct of the sale of their franchises.

5. As a self-regulating body for franchising in the country, how do you help professionalize and standardize the Philippine franchise sector?
Fra
PFA members are bound by the Fair Franchising Standards (FFS). By adhering to this Code of Ethics, the PFA members commit themselves to respect and to apply fair set of provisions in the conduct of the sale of their franchises.