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Archive for September, 2017

WHOLESALE FRANCHISING WITH THE AREA DEVELOPMENT FRANCHISE

Posted on: September 29th, 2017 by Francorp No Comments

Noel Siggaoat, Managing Director, Francorp Philippines

The investor signs one store at a time, but the franchisor may sell several franchise units to one investor only, and this wholesaletransaction is called an Area Development Franchise.

An Area Developer (AD) is a franchisee who signs up several units in a designated area.  He is a wholesale franchise-buyer, and the AD is given exclusivity within a certain period. During this period, only the AD can open stores in the area, but upon its expiration, the area is open to other franchisees and/or company-owned outlets.  This agreemtn may also be extended to provide a longer period of exclusivity.

The Area Development’s advantage is that the franchisor can open many stores in a new market fairly quickly.  Instead of granting one franchise at a time to several franchisees, he will just grant

multiple units in one transaction only.  However, many franchisors hesitate  to grant this privilege in a new city or region especially if the location is far and it is expensive to set up, deliver and support because there are only a few units, but if many units enter the market, the result is “lower costs per unit”.

Another advantage is the upfront money. ADs usually pay half of the franchise fees for all stores in his area upon signing of the Area Agreement. This seeks to compensate the franchisor for giving exclusivity to the area, but half of the franchise fee per store is paid by the AD once the stores are opened.  Each of these stores will still pay the royalties, advertising fees, and other expected fees.

Extra diligence is required in selecting an AD. It is more difficult to find this type of franchisee because he must not only have a higher net worth vis-a-vis a single franchise owner, but he should also be more sophisticated business-wise so that he can run this network of stores.  If the wrong AD is picked, the AD’s area will be poorly operated.

Can a franchisor use his existing franchise agreement for area development? Yes and No. Each unit which is opened in the designated area will still be covered by a unit franchise agreement, but the overall grant of the area is covered by an umbrella contract called the Area Development Agreement. In addition to the fees, number of units, and territory, this agreement will also include the Development Schedule, which states the timetable as to when the pre-agreed number of stores should be opened. Failure to meet this development schedule may result in several consequences to the AD—loss of AD status, loss of upfront money, reduction in area, or if the AD is in good faith, an extension with no penalties.

Is the Area Development franchise right for your business? Talk to a Francorp consultant today to find out.

 

The Key in Achieving 100+ outlets is FRANCHISING!

Posted on: September 22nd, 2017 by Francorp No Comments

Business visionaries choose franchising to increase their piece of their market.  Why are visionaries using franchising in order to easily expand into hundreds of outlets?

  1. Capital – The main obstruction to expansion is absence of access to capital, but franchising is an option in order to obtain capital. Entrepreneurs choose franchising because they can expand without the need of securing collaterized loans. By utilizing other individuals’ cash, the franchisor can expand with lessobligations.
  2. System – After the brand’s prototype has been established, visionaries use its solid reputation to extend into other regions. Once the brand’s system has been widely accepted, other franchisees can easily be recruited into the network.
  3. Franchise Support and Development – To easily expand, franchisors use sponsorship, and they also offer franchising. Some offer a reduced price of royalties, while others even waive their franchise fees to rapidly saturate the market. If there are more franchisees, then the brand becomes stronger because the franchisees can take advantage of a supportnetwork like, for example, a collective local advertisement.Conversely, a smaller group of franchisees offers lesser strength because the support system is merely skeletal at best.  They lack support because of the meager infrastructure.  Also, consolidation of support is not possible due to their meager numbers.

Franchising  enablesentrepreneurs to exponentially develop their businesses; that’s why the Philippines (more than 1,600 brands) is now the franchising center point of Asia.

Local Kiosks Seeking Global Franchise

Posted on: September 15th, 2017 by Francorp No Comments

One of the most reliable indicators of a successful franchise is its number of franchisees here and abroad.  Potato Corner already established its presence in six countries, while Bibinkinitanstarted its expansion at Dubai. Farron Café’s first international stint will be Indonesia, while Master Siomai is also expanding beyond the Philippines.

How did these brands succeed?

Joe Magsaysay, founder of Potato Corner, explained in an Inquirer interview:   “We had to change the rules or be innovative. We changed the way French fries are cooked, the way they are handled and the way they are served.  If we did not re-invent some rules on how to manage French fries, Potato Corner wouldn’t have been a success and the current brand and product DNA wouldn’t have been born.”

Whyare these local brands going global?

(1) They think their brand is strong enough to compete in the foreign market.  (2) They not only have sufficient capital, but they also think that they can fulfill a niche which is absent in that market.  (3) They found suitable partners which can help in the growth of their brand. Somebody invited them to invest in their market, and they happily obliged.   Luckily, they met their contacts from international trade shows, and they’re willing to partner with their brands.

The difficulties in going abroad include: legal complexities, finding the right partner who must be reliable, and avoiding corrupt government officials.   Once you hurdle these important issues, you can easily go global.

5 reasons to invest in a foreign brand

Posted on: September 8th, 2017 by Francorp No Comments

You might have dreamt of owning a foreign brand.   Before, foreign brands were owned by big players only. Now, foreign brands prefer smaller local players as long as they can grow the brand.  Smaller players put more time and attention to the brand compared to bigger players with a diverse portfolio.

“They don’t just want to be one of the many brands under a bigger company’s portfolio—when that happens, the focus is not on their brand but on the company’s more established and bigger brands,” shares Hans Clifford Yao, managing director of the Adrenaline Group, which brought in Petit Bateau, a children’s apparel retailer from France, and The Paper Stone, a Singaporean stationery brand.

Here are five reasons why it is sometimes better to invest in a foreign brand:

1. Brand and marketing discipline

A foreign brand has clear and established brand guidelines. You don’t have to invest in: development of a new concept, branding, and marketing strategies.  Foreign brands have yielded favorable results in different markets, but the foreign franchisor should be flexible.  It must not only adapt to the local market, but it must also put their foot down when localization destroys its concept—it’s about balance.

2. International standards and products

When you buy a foreign brand, you don’t have to learn how to market and operate it from scratch.  A foreign brand teaches you the best practices. They will also provide world-class franchisor support.  There’s no need to invest in product development.  You’ll also get continuous research and development support.

3. Speed

A foreign brand is already backed by numerous trusted suppliers and service providers. Hence, buying a foreign brand affords you speed in setting up the business.

Normally, a furniture retailer will take at least three months to set up.  However, the contemporary French furniture brand Gautier was able to set up the store in just three days because they sent their team from France to help with its construction.

“For The Paper Stone, the process only took six months because of the referral,” recalls Yao.

4. Location

When you have a startup business, it can be hard to secure a spot in prime locations, but a foreign brand can easily secure a good spot in prime locations like malls.  Also, these brands have previous experience in negotiating for good locations in different countries.

5. Brand recognition

You can ride on a foreign brand’s equity and strength.   Most foreign brands are easily recognized, and they’re profitable where ever they set up shop, but don’t focus too much on foreign brands.  You must also look at other available options in the market.

Ask your OFW (Overseas Filipino worker) friends about foreign brands which might work in the Filipino market.

“It’s worth it to invest in a foreign brand, especially if you are really addressing a gap in the market and bringing in something new that the local market has been demanding for,” notes Yao.

International Franchise Brands Looking at the Philippines and ASEAN

Posted on: September 1st, 2017 by Francorp No Comments

By Troy Franklin, COO World Franchise Associates

There are different opinions and perspectives on the benefits and perils of globalization. The events of 2016—such as BREXIT and the US Presidential election—are going to have a profound impact on globalization in 2017 and beyond.  There is no doubt that globalization is a thriving principle when it comes to franchising, and/or it is shaping the growth of the franchise industry in the ASEAN region including the Philippines.

More franchise brands are now operating in the Philippines and the ASEAN region.  As an area of focus in international expansion, more brands are presently looking at the Philippines and the ASEAN region. Regional brands are seeking to expand to neighboring countries, and this will ripple throughout the rest of the world.

The reasons—for the increase in the number of franchise brands that have entered or are looking to enter this region—are twofold.  First:it involves regional factors including positive socioeconomic factors and trends combined with the increased ease of doing business in the region which is due to economic integration brought about by the ASEAN Economic Community (AEC).  Second:  it pertains to broader global trends which impactthe franchise industry.

These global franchise trends took root in developed franchise markets such as the USA, UK and Australia, but the same trends are also emerging in ASEAN driven by the socioeconomic factors and fueled by the continuous emergence of an affluent, educated and informed middle class.

Some American brands seek regional master franchisees, area developers or franchisees in the Philippines and the Asean region like Texas Chicken which have been successfully operating in the ASEAN region for several years.  Afte opening in 2017, this company seeks to expand in the Philippines, Myanmar, and Cambodia. Little Caesars Pizza, the world’s 3rd largest pizza chain, and Au Bon Pain—with more than 352 locations worldwide—have the same goals. The Earlenterprises Group—that owns Planet Hollywood, Buca di Beppo and Earl of Sandwich—is planning to open several outlets in the Philippines and the Asian region.

North American service brands—Snap Fitness, 9Round and Cyclebar and Hollywood based Millennium Dance Complex—are also prioritizing the Philippines and other ASEAN countries for development.  Dallas based FastSigns, the world leader in visual business communications, and Jan-Pro, the world’s largest commercial cleaning franchise, are also actively seeking franchisees in the Philippines and across ASEAN.

Certainly, there is no shortage of US or international brands looking to enter the Philippines and the ASEAN region, and this represents a significant opportunity for Philippines businesses and investors looking to acquire international franchises.

For more information about international master franchise brands please contact Troy Franklin at troy@worldfranchiseassociates.com, or +60192101909, or on Skype at tfranklin