How to start a franchise? Franchising is a perfect way to start a business as it would offer entrepreneurs an opportunity to buy an already established business with branding, procedures, strategies, and processes already in place. However, it is critical to research the numerous options and find the right fit for you.
It is expected that franchisers would pay initial fees ranging from 500,000 PHP to 2 million pesos, while also paying monthly fees for marketing and other royalties.
To ensure being on the correct path, here is the 2022 complete guide on how to start a franchise, along with business franchise examples.
A franchise is a business owned by one or more people with a method of distributing the products and services through a mutual agreement between the franchisor and the franchisees. The franchisor is the owner of the original concept with its corresponding goods, services, trademark, and business system. Meanwhile, the franchisee pays the company a set of fees and royalties to do business under the name of the franchisor and its franchise model.
There are also different types of franchise businesses such as Business Format Franchising, Product Distribution Franchising, and Manufacturing Franchising.
Among the advantages of Franchising in business are having an already established brand that would attract more customers, using a proven business model and operating system that can easily be adapted or improvised, having the franchisor support with staff training, site selection, and the likes, and having a strong supplier network for the needed materials for operations.
On the other hand, there are also considered disadvantages. The first concern is having expensive fees and royalties. This may lead to higher investment requirements shutting out some franchise choices. Another problem is having limited control regarding the operations as it would be according to franchisor rules. This may include dictating the pricing, operating procedures, and allowable supply sources. A franchisee usually also has no say with regard to the overall franchise business model and brand. Lastly are possible brand scandals and head office decisions. Any scandals related to the brand may negatively affect the business. If the head office decides to increase prices, this might lead to a decrease in store sales, especially in the lower-income markets.
Nonetheless, with fast processing, low risk, and high success rate, there is a greater potential to earn big along the way with Franchising.
Franchising is also perfect for those with enough capital and business drive yet hardly have any idea about running a personal business.
In opening a business franchise, an entrepreneur must consider the following steps:
- Understand the world of Franchising
- Validate your business idea
- Understand the legal requirements
- Prepare for Marketing
- Manage your business survival
Understanding the world of Franchising means conducting deep research on a certain franchise and identifying if it fits the criteria you set. Try to attend franchise shows or seminars that feature owners of successful franchise brands to get a glimpse of how things must be done properly. Popularity must also not be the sole basis of choosing a franchise but it must also have a solid track record of excellent sales, a growing market, social responsibility, opportunities to upsell products and services, and even local competitions.
Validating your business idea can be done by identifying both short and long-term goals. It is also important to know your business budget, resources, knowledge, skills, and even interests. Evaluate whether such information is enough to execute the feasibility of a business idea and if a brand is within your scale or not.
Understand the legal requirements before starting a new franchise. A franchise agreement, franchise disclosure document (FDD), franchise fees, and other legal formalities are important in ensuring that everyone, including prospective franchisees, is on the same page. The application process usually takes about a week to one month, depending on the process followed by the franchisor. However, they generally follow the same system of completing the franchisor’s requirements, meeting with the franchisor and drafting the franchising agreement. This will then be followed by the completion of government requirements.
Once the franchise application has been approved, it is time to turn the idea into reality. It can be started with the crafting of a business plan, constructing the physical store, training the staff, familiarizing with management, especially with finance, and finally, preparation for Marketing.
It is important to let potential customers know your brand even before opening and keep them hooked throughout the first few months. Depending on the business nature and how promotions went, it can always be a trial and error with methods that keep the interest of potential clients.
Aside from sales, the franchisee must also learn to manage the business survival by keeping track of monthly expenses, inventory, employees, and government compliance. Juggling so many things can also be overwhelming especially for beginners but successful franchisees know that they are still in the early stage, must not quit early, and work harder until they make it.
The Small Business and Entrepreneurship (SBE) Council reported that over 5.3% of small businesses and 9.6% of large employers in the United States are all franchises.
According to the International Trade Administration, the Philippines is one of the largest franchise markets in Southeast Asia, boasting approximately 1,300 business franchises across various sectors. It also has a strong local franchise industry, proven by 55% of home-grown brands.
Meanwhile, according to U-Franchise, among the best business franchise examples of 2021 in the Philippines are food kiosks, bakeshops, beverages, water refiling, health and beauty, education tutorials, laundry, and alteration, microlending, retail, and other services.
Jollibee is the biggest fast-food chain in the Philippines. It started as a mere stall in 1978 which remains a driving force in today’s food industry while being true to its roots of offering Pinoy-friendly meals at affordable prices.
It is followed by 7-Eleven, Potato Corner, Petron, and The Generics Pharmacy. Investing in such business franchise examples would require a shell out of over 1 to 3 million before expecting a fortune to trickle like black gold.
Successful business franchise companies of today have a few things in common. The first is that they are established under a solid business plan. The second is that they use aggressive marketing strategies. Lastly, their franchisors are keen on providing complete and consistent support and training to their franchisees.
How to apply for a Franchise Loan with BlendPH?
A franchise loan is typically a loan that is utilized by those interested in starting a franchise of an existing brand. It is usually offered in banks and non-bank financial institutions (NBFI). An example of NBFI is franchisor financing, where the franchisor provides the funding and terms for the franchisee. This makes it so that the franchisor and franchisee are able to have direct contact and communicate regarding the ongoing franchise.
BlendPH offers franchise loans to those who are in need of funding for any brands partnered with them. Their way of franchise loan is through peer-to-peer funding which is an alternative and convenient way for loan applications to be made especially with it being done entirely online for the people who want to venture into the field of the startup business.
Their loans amount from PHP 50,000 up to PHP 2 million. The terms they offer vary from 12 to 36 months. The interest rate is a fixed 2% which is processed in 1 to 3 days.
As long as you have the complete set of information and documents, franchise loans and business loans will be easy to apply for. With all of the requirements at hand, the loan application is guaranteed to be processed and therefore guaranteed to get results.
But before submitting your complete requirements, make sure you have an average or a good credit score. Since most lenders will always check your credit score. This will be a defining factor for the loan application eligibility.
The first step in applying for a franchise loan is to use the loan calculator to check if you qualify for a loan. The next step is to create an account. Pick the brand you will be franchising then fill up and complete all the necessary requirements for your loan to be tagged as complete.
Any incomplete applications for up to two weeks will automatically be rejected by the system. Their teams will process the application by validating and verifying all the submitted information and requirements. Once the loan application is confirmed, it will be endorsed to a partner lender.
Verified loan applications are sent to partner lenders for funding. The borrower will be notified when a lender decides to fund the loan and if funds are ready to be reimbursed.
The peer-to-peer online funding platform provided by BlendPH is committed to offering both reliable and convenient loans that will not require a rigorous process and requirements. It has very flexible terms and low-interest rates which is definitely an advantage for anyone.