Perfect storm for the new generation of franchises

The Covid-19 pandemic may be the worst crisis that modern humanity has ever experienced, but it isn’t the first storm that challenged the optimists who anticipate the rainbow after the rain. This pandemic is a perfect storm for the new generation of franchises. This is the optimistic view of Samie Lim, regarded as the Father of Philippine Franchising. For her part, Alegria “Bing” Limjoco, who is regarded as the Mother of Philippine Franchising, said that when the economy is down, entrepreneurs arise. Both of them speak from vision, history and data. They have seen how franchising opened opportunities in past economic crises and recessions.

Bing Limjoco cited a Dub & Bradstreet study indicating a 90 percent success rate in franchising against a non-franchised business. She had seen how brands have grown, and how franchising has transformed the micro and small enterprises to become large enterprises. Indeed, franchising is probably the most resilient and sustainable business model. It is a business model where a franchisee is doing business for himself but not by himself. It is a replication of documented systems that work.

The Golden Age of Franchising

THE system of franchising uses the time, money, connections, experiences, and market base of the person to serve a particular target community. The two critical requisites to expand a franchise are (1) people, who are the franchisees, and (2) place, a location where the franchise will operate.

Samie Lim said there is an abundant pool of prospective franchisees that emerged from the pandemic. To him, these include those who retired

or have been offered early retirement. They may have the intention to invest their newly acquired financial resource. Also in the list are the many Filipinos who have lost their jobs, including overseas Filipino workers. There are also thousands of entrepreneurs who closed their businesses not because they are lousy entrepreneurs but because they happened to be in the wrong business for the new normal. Lastly, the quarantine has transformed many “mom-preneurs”—the happy housewives who accidentally became entrepreneurs. These are the potential entrepreneurs that Samie Lim refered to as ideal franchisees who have the time, money, connection, expertise, and market base to serve a market.

The place to locate and grow a business, the second requisite in expanding a franchise, is now widely available and very affordable because of the many businesses that have closed. Lessors in crisis are bound to give location rental at a bargain. The disruption that changed consumer behavior, as well as the health paranoia of the market gave way to a renaissance where business and commerce will be better located in the new normal. And bringing the products and services closer to the consumer favors franchising because of the brand leverage.

Given these, Samie Lim envisions that the years 2021 through 2025 will make franchising ideal. He sees this period as the Golden Age of Franchising.

The franchise hub of Asia

THE idea of franchising in the Philippines was introduced by Mr. Sergio Ortiz Luiz Jr. who, in 1993, presented to the Philippine Retailers Association a USAID study citing that franchising was the business model of the fastest growing businesses. In the same year, the International Franchise Association based in the United States sent 10 franchise experts and brands to the Philippines. The First Franchise Conference happened in 1994 with an overflowing audience. It was in 1995 when the Philippine Franchise Association (PFA) was born, with Samie Lim as founding president, former Secretary Jose T. Pardo as chairman, and Manny Siggaoat as cofounder.

As a PFA cofounder, Bing Limjoco noted that, in the beginning, the Franchise expo had 70 percent foreign brands with merely 30 percent representing local brands. But she observed that over the years, the proportion has reversed, with 70 percent of the exhibitors being Philippine brands. It is also noteworthy that several brands have penetrated the international franchise scene.

In 2001, PFA hosted the World Franchise Council Meeting and the Asia Pacific Franchise Confederation meetings in Manila. In 2002, for the first time in Asia, the PFA brought to the country the Certified Franchise executive Program from the Usbased

International Certified Franchise executive (ICFE), which annually brings to the country franchise experts to train and certify not only Filipinos but also executives from all over the world. In 2011, the international franchise meetings were once again hosted by the PFA, making the Philippines the Franchise Hub of Asia. Annually, PFA organizes Franchise Asia Philippines, the biggest franchise show in Asia.

PFA is currently the Secretariat of the Asia Pacific Franchise Confederation and a member of the Working Committee of the World Franchise Council, whose task is to create activities that will advance franchising globally. And 2020 is PFA’S Silver Anniversary.

Franchising and the PHL economy

THE Franchise Industry Study (2019) by Dr. Ramon Quesada from the University of the Asia and the Pacific showed that the Franchise industry contributed 7.8 percent to the country’s gross domestic product, which is equivalent to $31 billion. The franchising taxes amounted to P171.07 billion. The direct and indirect taxes of the franchising industry are P83.8 billion and P87.3 billion, respectively. The franchising industry generates about 2 million direct and indirect employment.

These contributions are manifestations of the PFA’S mission to promote franchising as a powerful tool for economic development and nation building. PFA is guided by its vision for the Philippines to be the “Center for Franchise Development in Asia.”

The PFA’S First Virtual Conference will be on September 21 to 25, 2020 featuring over 25 Ceos, brand owners and experts on the theme “Pivoting Towards the Golden Age of Franchising.” More information is available at www.pfa.org.ph.