The Right Model
Our cover story on franchising is the third cover story we have done on the subject in the 13-year history of Philippine Business. This shows just how important and relevant this model of expansion is not only locally but internationally as well.
Our first feature on franchising was in 1997 when the retail sector was still closed to foreign investors. Back then, franchising was the route that local businessmen took in setting up stores or outlets of foreign brands. Since foreigners could not directly invest in the country, local businessmen would buy the foreign franchise and get the exclusive right to sell and market the foreign brands locally. We again devoted a cover story on franchising five years later in 2002, this time highlighting the growing number of successful homegrown franchises, like David’s Salon and Julie’s Bakeshop.  Franchising was first introduced in the Philippines by Singer Sewing Machine in 1910, around a decade after the concept was first employed in the U.S. History books reveal that the word “franchise” comes from an old French word that meant “privilege” or “freedom.” In the Middle Ages, local sovereigns or lords would grant rights to hold markets or fairs, to operate the local ferry, or to hunt on their lands. This concept carried on to the kings who gave franchises for all kinds of commercial activities, like building roads or brewing ale. Over time, the regulations governing franchises became a part of the European Common Law.
Business format franchising, which is the dominant mode of franchising today, was born after World War II and the baby boom that fueled the overwhelming need for all types of products and services. In this situation, franchising was the ideal model for the rapid expansion of businesses. In the country today, the Philippine Franchise Association lists more than 800 businesses using the franchising model, from just less than 50 two decades ago. Another group, the Association of Filipino Franchisers Inc., lists another 50 or so members. Accompanying this phenomenal growth, though, has been the mushrooming of fly-by-night franchises. The associations, therefore, have been working to protect the industry against unscrupulous operations, in addition to assisting members and would-be members in developing their businesses.
For those interested in getting a franchise but are still undecided where to put up the business, you may want to consider Cotabato City. As our story on page 22 reveals, Cotabato City promises to be fertile ground for new businesses as the place thirsts for the lively spirit of urban areas. For now, it may not yet support the sales volume and income level required by such big franchises as McDonald’s or Jollibee, but it is fast getting there. Cotabato City is the regional center of Region 12 and the Autonomous Region of Muslim Mindanao, and as in most regional centers, it will be a magnet for economic activity and trade. We encourage would-be franchisees to give the city a closer look.
NONETTE C. CLIMACO
Publisher & Editor-in-Chief
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