Spotting the winning franchise brand

For more and more aspiring business owners, the long leap from employment to entrepreneurship will begin with a franchise. After all, a ready-made business that already has a product with proven appeal guarantees less start-up pains.

A sound franchise business comes with a number of systems already in place and which the franchisee merely needs to implement.

The more successful enterprises include manuals, each one spelling out the procedures to be followed in the key functional areas of operations, marketing, training and the like, according to Tess Ngan Tian, president and co-founder of Lots’A Pizza (LAP).

Tess points out that it was her husband Ed, Lots’A Pizza chair, who pushed that they create a pizza that would appeal to mid-income value seekers wishing to bring home something delicious and filling to their families on their way home from work.

Ed required that the pizza had to be ready in minutes but had to remain fresh and chewy even hours after it had been purchased.

It was Tess nevertheless who went to baking school in the US and came up with the formula of a parbaked or pre-cooked crust. Slathered with their secret sauce custom made for them by Del Monte, premium toppings from Purefoods Hormel and special cheese made by Kraft, the pizza needed time in the oven only for the various flavors to meld and fuse together. After perfecting the product and pushing it in various outlets for 10 years, it was Ed once more who pushed that Lots’A Pizza expand its market reach through franchising.

Among the pioneers of the Association of Filipino Franchisers Inc. (Affi), the Ngan Tians have held various positions in the organization that count many successful homegrown brands as members. In fact, most of the Affi business owners themselves will be present to share their expertise and experiences with aspiring franchisees on Oct. 12 to 14 at the Affi event at the World Trade Center focused on the theme: “Galing ng Pinoy”.

Franchising tips

Tess, who was past president and chair and is now auditor of Affi shares a number of tips on spotting a good franchise business.

1. Choose a business that is a member of a reputable organization of franchisors. Membership in a dynamic organization allows many opportunities for its members to share best practices in franchising. Such organizations are likely to limit membership only to other business owners who would add to- and not detract from-  the prestige of their group.

Tess adds: “Our organization would like to cater to as many aspiring entrepreneurs as possible by offering them more affordable fees.

“A Lots’A Pizza franchise, for example, ranges from P550,000 to P950,000.

2. Choose a franchisor with stores operated by franchise holders as well as the company itself. Tess explains that because it operates 55 of the 188 Lots’A Pizza stores in Luzon and the Visayas, LAP has a keen understanding of its business.

“Our experience in our own stores allows us to teach our franchisees how to hurdle the problems and challenges they may encounter.” More than many other brands, for instance, LAP offers its business partners extensive training.

It teaches its partners, for example, to come up with a comprehensive assessment of a site using computations, interviews and actual research. In addition to a market study of the site, franchisors are also taught how to do a financial viability plan.

3. Pick a brand with a stable and marketable product/s. Remember the pearl drinks and the drinks that use shaved ice as its main ingredient? Both have come and gone. For all the trouble one will go through to set up a business, the enterprise may as well be built around a product that will have market appeal for a long time to come.

Pizza, for instance, is no longer just a craze. In fact, for many working moms, Lots’A Pizza has become regular dinner and celebration fare. “We’ve sold millions of Lots’A Pizzas, which is proof of the product’s appeal,” says Tess.

4. A food franchise is only as good as its commissary.  An efficient commissary means that a franchisee will always be able to get the stocks he needs to make the margins he desires, she notes. It is thus important that a brand’s commissary be operated by the owners of the brand themselves—and not a third party who will feel less compelled to deliver stocks as needed to the franchise holders.

Moreover, franchise holders need to study the location of the commissaries and their capacities to meet volume orders. During the monsoon rains last August, for instance, food commissaries located in flood-prone areas were unable to deliver stocks for weeks. For its part, Lots’A Pizza has four commissaries—one in Las Piñas to fill NCR orders; in Pampanga to fill orders from Central and Northern Luzon, in Cavite for Southern Luzon orders; and in Cebu to fill orders from the Visayas.

The commissaries likewise help out each other meet volume orders.

5. Study the personal dynamics among the business owners. A famous food brand in the ’90s is no longer around because its owners—a husband and wife team—parted ways. Moreover, the husband continued to run the business even if it was his wife who had more hands-on knowledge of the enterprise. When an enterprise is owned by a number of shareholders, it is even more important to see how they relate to one another. As a rule, the more shareholders there are, the more interests will need to be served. Those interests will not always harmonize with one another unless it is balanced off with good, principled leadership.

In the case of a family-owned corporation, it is important that the members know how to relate to one another wearing different hats-as business owners and as relatives.

Ngan Tian relates that at Lots’A Pizza her children who run various departments refer to her when on the job as “Ma’am Tess” and to her husband as “Sir Ed” as a means to delineate roles and functions.

Ultimately, franchising is a relationship between the franchisor and the franchisee, says Tess. When there is mutual respect among the parties, the business in general thrives. And when the business thrives, a successful franchisee is likely to get another franchise from the same brand.

To enjoy free admission to the 11th Filipino Franchise Show on Oct. 12-14 at the World Trade Center, send an SMS to 0922-8149882 with your full name or call (02)6540345 or visit affi.com.ph.