When does a brand become worthy of franchising?

Yvette Pardo-Orbeta

Yvette Pardo-Orbeta is the chair of Wendy’s in the Philippines. A certified franchise executive and president of Philippine Franchise Association (PFA) from 2009-2013, she shares with us issues often taken for granted by neophyte franchisers.

Q: What’s in the mind of a neophyte franchiser?

A: Some people think, “I have a successful brand therefore I should franchise,” but the most important aspect of franchising is the ability to seamlessly replicate successfully a thriving business.

One must not risk other people’s money, time and people to experiment on replicating a business. One successful outlet does not necessarily make it a good prospect for franchising.

PFA is selective when it comes to admitting new members. An applicant must have at least three company-owned stores, three franchised outlets and should have been in business for at least three years. This way, we can make sure that our members have the ability to support their future franchising growth.

Do your homework first:

1. Prepare your company.

2. Seek legal advice from franchising lawyers.

3. Market your company and yourself; formulate a selection and approval process.

4. Choose sites wisely.

5. Ensure ongoing support for the franchisee.

Q: How should the company prepare for franchising?

A: The most tedious and painful step is documentation and creating manuals for each and every process you have.

This would include the “backroom work.” It is somewhat akin to getting your ISO certification.

Q: How about legal processes?

A: Ensure that your brand name is registered and all patents and trademarks are properly registered not only in the Philippines but in other countries where you are most likely to want to put your brand. Dream big!

Wendy’s cannot enter Australia because there has been a Wendy’s there for years—an ice cream parlor. Another example is Panda Express. They had a very, very difficult time entering the Philippine market because someone else registered a brand very similar to it.

Prepare your franchise contract properly with the help of an expert who knows the nuances of a franchise contract.

Q: What are the minimum requirements when thinking of marketing your company and yourself?

A: In terms of budget, I would allocate a minimum of 4 percent of sales to marketing to maintain market share and 6-8 percent for new entry into the market and when there are new competition in your trade area.

Hiring the right marketing team to sell your brand should also be considered.

Q: How should the selection process and approval process be like?

A: Normally, the selection of a franchisee is like courtship through a dating site. You get to know your potential franchisee first on paper (submission of application form), then you talk to them several times, visit them in their place of business, comb through social media about them.

Find out all you can about them, do your research and encourage them to also do their own homework about your company.

Most often—a must for larger franchises—they do credit investigation and hire a third party to get more information about the potential franchisee.

Selection is critical because you will be in business together for at least 10 years, which could pass by so quickly if you get the right partner or it could feel like decades if you didn’t.

Q: How do you select a site for a franchise?

A: Each brand should have its own site selection process depending on the target market and the type of products/services it has. There is really no one site selection process that encompasses all brands and all types of business.

However, do actual traffic counts, both vehicular and pedestrian, and look for traffic drivers in the area. Do not simply rely on the mall’s data, do your own research. Focus in areas where your competitors are located so you will also know their capture rates—this is actually the best indicator of your potential sales.

We have heard it several times that “location, location, location” is the most important aspect of doing business. This is actually no longer the case with online purchases and delivery.

Yet, when you are just starting your business, you need to create a look, feel, experience for your potential customers and you can only do these through physical outlets.

Q: What else should franchisors give to franchisees?

A: I am a staunch believer of training. And for me, the biggest support the franchisor could give the franchisee is continuous training, not just in operations but in all aspects of the business: finance, marketing, human resources, supply chain, etc. Their success is your success, so do not leave room for them to fail.

For people who want to start their own business, I recommend that they should start by getting a good franchise so that they can learn the ropes on how a successful business should run. If you look at some of the more successful franchisors, they were involved in some aspects of franchise before they took the plunge and started their own businesses.

As we say in the franchise industry, “You are in business for yourself but not by yourself.” Getting a great franchisor is critical to learning everything about business that books will not teach you. —CONTRIBUTED