When is the right time to franchise your business?

by Armando "Butz" Bartolome

Posted at Feb 14 2014 12:35 PM | Updated as of Feb 17 2014 05:06 PM

Editor's note: The Business Mentor is a weekly business column by Armando "Butz" Bartolome, president of GMB Franchise Developers Inc. and chairman of the Association of Filipino Franchisers Inc.

MANILA, Philippines - Many start up entrepreneurs reach a stage when people ask if they can franchise their business to others.

In fact, a great number who approached me have only been in business for an average of 3 months. They were eager, as there have been a number of queries from customers.

Meantime, there are also some who start a business, and nurture the dream of attracting the giant conglomerates — as what happened to many acquisitions of local brands started by young entrepreneurs.

For my part, I am fortunate to have assisted five clients who were approached and eventually bought by big companies, either 100% or 70%.

Still, there are those start ups that simply want to pursue their passion in cooking or in baking without thinking of expansion.

And of course, everyone is enamored with the restaurant business as it is “sexy” to have one. A lot of restaurants barely make their rent and operating expenses, but owners usually keep these businesses for the bragging rights.

When do we decide if we should franchise our business?

A good friend of ours started the green trend in cafes and now she sees more people copying her pandesal "meatless" burger and fresh fruit juices and even the colors of her store.

Should she be flattered or should she be irritated? She asked me what she should do. She didn't know what to do since some customers would take snapshots of the products, the store lay-out and the color schemes. There was even a time, when she found several people having a meeting and taking measurements of the place. She introduced herself as the owner and inquired why they were doing such activity right inside her store? One of the ladies in the group explained that they want to bring the concept to the United States!

Upon learning of these incidents, I told her: “You better think of franchising!” "But I only wanted one store, “ she says.

Sorry, Madam, if all you want is one store, you cannot help but see competition copying you in no time. You see once a business is opened to the public, no matter what location if the food and concept are good, word will spread and soon copycats will be hounding the place.

That only means she is doing well, doing good and looking well, too. If not, who would copy a sad-looking business? Does she have any choice? Oh sure she has! She can just remain where she is and let those who want to taste her popular recipe come.

I have seen a number of places like that in the metropolis. On the other hand, she can look at the benefits of franchising? There are times when the word “franchise” may sound Greek to entrepreneurs. Or they may feel “they are not ready yet”.

Exactly when can somebody say that the business is ready? Josie See of Peanutworld, Richie Cuna of Fiorgelato, Tess Ngan Tian of Lots A Pizza, Bards Lapid of Chicharrific, Gilbert Jim of Bubbatealicious, Rommel Juan of Binalot, Sarah Salcedo of Baliwag Lechon Manok and Liempo, Lita Urbina of Café Laguna, Vic Perea of Mr. Softy, Jose Magsaysay of Potato Corner, Cielo Templo of Cielo’s Doughnuts, Bong Magpayo of Sweet Corn, and countless others never manifested to me that they were ready.

A great number where even in their incubation or growing stages. Yet they dared to begin the process of looking forward in expanding their business.

Those people I mentored began with a positive outlook in mind. They prepared a process so detailed, sometimes leading to drastic changes, experimentation and paradigm shift.

There was always a joke among them that whenever they saw me and especially if my wife Lyndah was with me they would take ibuprofen pill for headache! It is better to face the problems prior any franchising is done.

What may be a disaster is for the franchisor to come unprepared and face franchisees with different concerns.

Of course there will be problems as part of the growth of the brand. Yet the franchisor has been prepared. Like soldiers, they undergo tedious process and horizontal foundation building.

A successful franchise is the result of all the hard work and efforts of a franchisor. There is no magic pill to speak of. There are entrepreneurs who believe that a sure fire to success is just copy and copy without innovating. Sorry but this is where many brands flop!

Here are a couple of tips to set the tone in franchising your business:

1. Documentation of the procedures:

This refers to writing step-by-step on how to prepare the products or services. Consistency and quality control should be taken care of especially when there is big demand and the number of branches begins to grow.

2. Identification of recurring problems in the operations of the business:

No matter how small the problem if it keeps happening, this is a sign something has to be done. Taking it for granted may become a major obstacle in the future.

3. Is there a business model to showcase the concept? How profitable and acceptable is it?

Franchising speaks of having a successful model. This means from the external features of the store to the products and services, there is a positive acceptance by the targeted consumers. The financial statement too must be showing profit to determine the payback of the investment.

Finally here is something for all to ponder:

“A journey of a thousand miles begins with a single step”. Lao-tzu (604 BC - 531 BC), The Way of Lao-tzu

 


For questions and more information, you may contact Armando "Butz" Bartolome by email: [email protected] His website is http://www.gmb.com.ph