Franchising in the Philippines

Franchising has been in the Philippines for 112 years, with the entry of Singer Sewing Machine in 1910, which introduced product distributorship. Numerous companies embraced this concept as their vehicle for business expansion over the years. From 1910 to 1965, businesses staked their flags in the Philippine economy through PRODUCT DISTRIBUTORSHIP. Some of these multinationals were tire and pharmaceutical companies.

The take-off was slow in the early years as the succeeding companies like A&W Restaurant, known for its root beer, entered in 1965. The first outlet was established on Highway 54 (now popularly and historically known as Epifanio Delo Santos Avenue or EDSA) near the Big Dome-Araneta Coliseum. The concept was a drive-through where women food attendants garbed in mini-skirts, black stockings, and roller skates would serve customers inside the comfort of their cars. Trays clamped by the door side and mugs with cold refreshing root beer partnered with foot-long hotdogs were filled. Its set-up was the same as in the US branches during those years. What this company brought was another form of franchising, which is known as the Business Format. From then onwards, most entrants into the market embraced this concept. In fact, so widely used not only in the Philippines but worldwide.

Product Distributorship

This is a form of franchising where owners of products allow other parties to sell or distribute their products or even use their trademark as a dealer. There is minimal or no control of operations. The relationship is centered on the quality of products sold.

Business Format

A form of franchising used by 90% of companies involved in franchising. This is why franchising is considered the most successful way of expansion worldwide.

In business format, the franchisor, more than his registered trademark and products, has developed a business system that is made available for use to franchisees. Compliance with the business system is the core and essential element of their contractual relationship embodied in a franchise agreement.

The first survey of franchising in the Philippines in 1995 revealed that there were 50 operating foreign franchisors at that time. The success rate of foreign franchisees is 97%. In 2003, there were 315 foreign franchisors in the country with an 87% success rate.

Philippine-Based (Home-Grown) Franchises

The earliest recorded homegrown company that used business format franchising was PANCAKE HOUSE. It has been franchising since 1978. PANCAKE HOUSE is still active in franchising and transferred ownership a few years back.

In 1996, there were 94 companies using franchising as their route to expansion, and the number substantially increased to 481 in 2003. The success rate is a good 90%.

Philippine Franchise Scenario

Franchising in the country evolved from the US Franchise System. There are, however, no laws that regulate franchising. Companies and developers use international franchise practices as a reference and guide to pursuing this type of business. The increasing number of homegrown companies using franchising in their expansion can be attributed to the presence and an increasing number of foreign franchisors. They served as motivators and inspiration for the local entrepreneurs.

Franchising for years has been the monopoly of the food sector . It was only in the mid-1990s that service and retail entrepreneurs used franchising.

There was an absence of franchise education in the country for decades. Franchise Conference and Seminars started only in the mid-90s. Franchise Associations were also formed with the vision of professionalizing and standardizing the franchising and policing of their own ranks.

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