In the 1930s Franchising became a vogue in the United States when Singer Sewing Machines became a favorite household brand. In the Philippines Franchising became popular in the 1990s when new homegrown chains started to franchise their brands, but with the requisite support system as mandated by practice among practitioners like the Association of Filipino Franchisers Inc. and the Philippine Franchise Association.
I am often asked why there has to be two organizations the AFFI and the PFA. Having been the Founder of AFFI and its President in 2000-2002, I always explained that Filipino SME brands had different needs. At AFFI we believe that owners must be hands-on in Franchising their “babies”(what we called our franchise businesses) , as we differentiated ourselves from the PFA, whose brands were big stalwarts who had professional managers running their franchises.
As AFFI turns 12 years old this year , however, I am seeing a change in consumer demand for franchising and its sister, licensing. As consumers get attached to brands, these brands become more popular as franchise businesses and we at AFFI are happy that the public is now more aware of the differences between franchising and licensing or franchising and the absence of a system. Maybe some companies ought to just license their brands and not use the term “franchise” to mean a signboard or a name. It gives franchising bad press when companies merely want to lend their name but label the arrangement as a franchise.
What’s in a name? Well, just like first impressions, a name is what draws an unknown customer to your store or company. The name is the seal or guarantee that you can be trusted. It is registered with the proper agencies like the Intellectual Property Office (IPO)as a trademark or service mark, and the Department of Trade and Industry (DTI) as a business name.
What’s in a Franchise? A franchise is shared passion, shared philosophy, a support system and most of all it means full support for the growth and protection of a brand. Why do we keep mentioning “system”? A system is a whole organization driven to achieve the same mission and objectives: the growth of a brand, the growth of a business, continuing support for the franchisees through training, advertising, human resources and really almost like a big brother holding the hands of his smaller sibling as they tread the path to success.
Sadly, however, franchising as a term has been tainted with sad experiences of franchisees just getting a mere license to use someone else’s name , not even a brand that has value. Just a name. It also has been tainted with bad deals like “no support” once the contract has been signed. It has a lot of tales of frustrated franchisees wanting their money back but to no avail.
This is where the idea of Licensing should be explored. Though it is not a system for everyone, especially those just starting a business, it is a good and workable idea for entrepreneurs who have some experience but are only in need of a name for recognition. Many entrepreneurs have experience in running a restaurant, a salon or even a school. But what they do not have is a brand or a name. This us where Licensing will work. A Licensor allows the use of its brand name or service marks to responsible entrepreneurs who have experience in managing a business already.
So is it Franchising or Licensing? Which is better? What should you be wary of? In Franchising, check the Franchisor.
Does he use the product he sells? Example: Does he drink coffee if he is running a coffee franchise?
Does he have managers knowledgeable in all aspects of Training, Operations, Marketing, etc?
Does he have a supply chain?
Are his franchisees happy? (If you are the first franchisee, take extra care.)
Does he know his business well enough to give you fingertip information? (what are average sales, where does he get his products, what are his marketing plans, ideas, plans for the future?)
In Licensing, check the Licensor:
What is his experience in brand management? Has he launched and maintained popular and trustworthy brands?
What is his support system in marketing and advertising?
What is his plan for the next 5 to 10 years?
And most of all, before you decide which path to take, do a self-check up:
Why are you going into business? Is it a hobby , is it for extra income, or just wanting to learn something new?
What do you need? A business format or just a brand or name?
http://www.abs-cbnnews.com/views-and-analysis/08/28/09/franchise-or-license
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