Franchising vs. Start-Ups

by Chit U. Juan

The dream of putting up one’s own business has become more pervasive in recent years. And why not? Considering the hard economic times when monthly paychecks are unbelievably stretched, and retrenchment looms just around the corner, the idea of having one’s own enterprise to rely on has become more appealing, even one of the best options there is.

Beyond the dream however, is the reality that most people do not know how to setp up a business, much less where to begin. What business will I get into? How much capital will I need? How do I attract customers? These are questions that are difficult to answer especially for a first-time entrepreneur. In these times of cutthroat business competition, the uninitiated businessman often loses before he even starts. One solutions to all these? FRANCHISING.

In franchising, the Franchisor, or owner of the business, offers his tried and tested method of doing business, often called “business format or model” for others to use in exchange for franchise fees and royalties. The Franchisee, or the one borrowing the business model, pays these fees in exchange for the right to use the Franchisor’s trademark, operations manuals and the privilege of being trained by the Franchisor himself.

A Franchised business has a better chance at success than an independent business because the Franchisee can learn from the years of experience of the Franchisor. Since there is less trial and error, it is almost like having no learning curve.

Another unique feature of a Franchised business is its support system. Franchisees can have access to Franchisor services such as administrative assistance, bookkeeping, audit, quality assurance inspections, marketing support and even legal counsel. Through some may be charged separately by Franchisor, the extra services are nevertheless available and only at minimal fees.

A Franchised business grows as the brand grows. Since a big part of having chosen the business is its name or trademark, the Franchisee has a better chance of growing together with the brand.

A Franchised business has benchmarks or Standard Operational Expectations (SOE) by which franchisers can measure the performance. This means they can share and compare their experiences with business operators with similar problems or situations.

Especially for those going into business for the first time, a franchise is most recommended for testing the business waters, to check if entrepreneurship is really for them. Some realize that it is not for them only after having invested a lot of time and money. By then it could be too late.

Here’s a checklist for those deciding on whether to start on their own or to get a franchise:

1. Can I follow rules? Or do I want to make my own rules?
If you find it difficult following rules and regulations, be on your own.

2. Can I just assign a manager or do I have to be there myself?
A real entrepreneur is always “hands on”. You should not be afraid to get your hands dirty.

3. What if I change my mind after six months? What if my family asks more time from me?
Do not franchise if you have not asked the family’s consent. Most franchisors want you over the long haul, at least three years, and being fickle will complicate matters.

4. Do I really like the product or I just want it because it is popular?
Do not go into a business you do not enjoy. If you get a franchise, get it because you believe in the product

5. Do you have a really good asset or skill you can capitalize on?
If you do not want to depend only on your skills, get a franchise.

To those who decide to go the franchising route, congratulations! You are about to embark on a safe and steady journey to entrepreneurship. However, choose your franchise business wisely.

Be wary of “fake” franchisors who are after fees but do not have even one successful store to show for their offer. Legitimate franchisors, especially those who have been around for two years or more, can show you their operations and their performance. Check their track record. Visit their stores. Experience their service or prpduct. Talk to existing franchisees. Observe their employees. If you like what you see and believe in the brand, then pursue it.

The Association of Filipino Franchisers, Inc. (AFFI) sponsors seminars to guide those who are interested in buying a franchise. Call the AFFI Secretariat at 892-9535 or 813-5836 or email AFFI at info@filfranchisers.com.

Source: Business Line Vol. 1 No. 2 2003