by Rudolf A. Kotek
How does a franchise chain start?
Imagine a store owned by an individual with a particular concept. If the business is successful, the owner may develop a second store and hire employees for the day-to-day operation.
At that point, if the entrepreneur still wants to expand but prefers not to own and operate additional stores, he/she may decide to franchise the store name and business system to an independent business person – the Franchisee.
In return, the Franchisor may ask for an initial fee and continuing royalty payment based on a percentage of that Franchisee’s sale. The business is now franchised.
When I visit a store how can I know whether that store is owned by the Franchisor or a Franchisee?
It’s difficult to tell just by visiting the store. Many companies have stores that are owned and operated by Franchisees but also have stores that are company-operated.
It’s entirely possible that of two stores with the same name, one may be owned by a Franchisee and the other owned by the Franchisor Company. In both cases, the products, services and quality should be identical.
How wide spread is franchising?
There are more than 10,000 Franchisors around the globe, and alone 900 in the Philippines, operating revenues of more then 100 Trillion Pesos yearly worldwide.
Where does franchise sale comes from?
Most franchised sales are still by product and trade name franchise chains – food, automobile services, general retail, courier services, real estate brokerage, building services and improvements, and domestic, business and maintenance services.
What is business format franchising?
In business format franchising, the Franchisor prescribes for the Franchisee a complete plan or format for managing and operating the establishment, not just product, service and trademark.
The plan provides step-by-step procedures for every aspect of the business and, anticipating most management problems, provides a complete matrix for management decisions confronted by the Franchisee.
It comes with marketing strategy and plan, operating manual and standards, quality control, research and development and a continuous process of training, assistance and guidance.
The Franchisee is required to comply with the Franchisors guidelines pertaining to all aspects of the business, including operating procedures, the quality of products and services, and the physical appearance of the business facility.
Rudolf Kotik is the founder of RK Franchise Consultancy Inc, which developed more than 350 Filipino Companies into Franchise Systems. Email: rk@rkfranchise.com; Websites: www.rkfranchise.com, www.franchise.ph.
