MANILA, Philippines - In an economy with slower-than-usual consumer spending, sinking a relatively significant amount of hard-earned cash into a business does not make sense, right?

Actually, it does, says Paulo Tibig, owner and president of logistics firm V Cargo and vice president-external of the Association of Filipino Franchisers Inc.

?Although the economic situation is bad, franchises, especially those in the food business, are still growing. Some of our members are even expanding, seeing that the market is now outside Metro Manila. Many are going to other parts of Luzon, which is a big market, and even Visayas and Mindanao,? he relates.

Affi president Rommel Juan, who is also the owner of native food chain Binalot Fiesta Foods, adds that Affi has gotten even more franchise applications this year than last?proof that more Filipinos want a piece of the franchising action.

?Last year, most investors were hesitant to let go of their money because of the crisis. This year, investors? confidence started to go up,? he says. ?But instead of putting their money in intangibles such as stocks and securities, investors now prefer tangible investments such as franchises because these are within their control.?

Richard Sanz, Affi public relations officer and president and chief executive of Bibingkinitan owner Food Asia Corp., adds that franchises usually have a 95-percent success rate, compared to the 80-percent failure rate for start-up businesses.

?Franchises are investments that are tangible and that people can control during these trying times. We really want to promote Filipino self-reliance and entrepreneurial spirit,? he says.

Love it, understand it

But before taking the franchising plunge, Juan says potential franchisees have to know and understand the franchise they want to get.

?In franchising, you need to love the concept. You can?t get a franchise of Binalot when you don?t eat the food that it serves. That just won?t work,? he says.

Tibig adds that, more than just a vehicle for making money, franchises should also give their holders a sense of fulfillment. This is where heart comes into the picture.

?You can?t go into the franchising business without your whole heart into it. Franchising is not just about making money,? he says.

Love for the concept and a heart for the business, however, are not enough to make a franchise a success.

Juan says potential franchisees should always do their homework before shelling out cash for a franchise.

?Talk to other franchisees, find out if the proper franchise support is there. The business you want to go into should have the proper support, including an operations manual, a marketing plan, a commissary (for those in the food business), and other forms of support,? he relates.

?It also helps to know if there are franchise holders who have second outlets, as this will show their satisfaction with the brand and the kind of support that they get from the franchise owner,? he adds.

Good returns, minimal investment

Of course, as with any other business, potential franchise holders should also evaluate the potential returns.

According to Seaoil Philippines Inc. marketing director Art Cruz, the usual rule of thumb of a return on investment after three years also applies to franchises.

Juan says ROI is faster at 2.5 years for the food business.

While potential franchisees are assured of returns on their investments, assuming that they run their businesses well, they are not expected to shell out that much money at the onset. Depending on their available capital and appetite for risk, franchises can go for as low as P300,000.

For franchises under Affi, whose members are mostly small and medium enterprises, Juan says potential franchisees will have to invest at least P300,000 for carts businesses and from P2 million to P5 million for store-type franchises.

These amounts are not that bad, Tibig says, considering that total sales registered by Affi members last year reached P13 billion.

To date, he relates that the organization?s more than 80 SME members have more than 4,000 outlets nationwide, 3,000 of which are franchises, generating employment for 24,000-25,000 individuals.

Potential franchisees

?These figures show that we in the franchising business are an economic force to reckon with. The more that we promote entrepreneurship, the more we will produce people who want to go into business,? Tibig says.

The franchising industry has significantly jacked up its appeal to retirees, fresh graduates, and overseas Filipinos, as this particular niche turns to entrepreneurship as the best solution to weather the economic storm, Juan says.

He relates that the industry has become very appealing to OFWs who have found themselves displaced due to the global recession. They, after all, now have both time and money to spend on a franchising business.

?We want to promote the re-integration of our OFWs into the local economy. We also want to address the dole-out mentality of OFW families. We want them to realize that they can?t just forever rely on what their OFW family members will give them,? he says. ?The franchising business is structured in such a way that even families of OFWs can manage or handle franchises.?

Retirees are likewise drawn to the franchising sector, he says, because this type of business affords them a way to still be productive without having to go through the birthing pains of an entirely new business.

There is also a trend now among parents with cash to spare to give franchises as a gift to their children upon graduation, he says.

Overall, he says the appeal of the franchising business stems from the increasing awareness of people that entrepreneurship, more than traditional employment, will enable them to weather the economic crisis.

?People now know that the answer to the country?s economic problems is entrepreneurship,? he says.

For individuals who want to know more about franchising, Affi will be holding the 8th Filipino Franchise Show 2009 on Sept. 4-6 at the World Trade Center.

Juan says the show aims to educate more Filipinos about the franchising business. It will also serve as an opportunity for potential franchisees to meet franchise owners from various fields.