Doing Business in the Philippines as a Franchise in 2024

Why Franchise?

Franchising allows an entrepreneur to practice and use an existing perfected business concept. For an entrepreneur who is new in the Filipino market and aims to start a risk-free venture, franchise is the best business vehicle to opt for.

There are two kinds of franchising options existing in the Philippines:

• Product Franchising: In this form of franchising, the manufacturer gives the right to sell its products to the franchisee, however, the manufacturer does not provide with any methods for conducting the business.
  Examples: Car dealerships, service stations.
• Business Format Franchising: In this form of franchising, the franchisor grants the franchisee with the right to use the name, market the products and services of the franchisor as well as with the managerial and operational know-how of the business.
  Examples: Subway, Pizza hut.

When an entrepreneur buys a franchise, he/she mainly benefits from the years of experience and the necessary know-hows of the franchise system. It has the main advantages of i) having a ready-made operating system, brand and support and ii) having a low-cost and hassle-free initial setup.

Industries where franchising is common

The Philippine Franchise Association (PFA) has members ranging from micro to large, involved in food, retail, services and other types of businesses. Some of the noteworthy arenas to conduct business in Philippines as a franchise are i) food kiosks, ii) water refilling stations, iii) spa and salons, iv) vending & service machines, v) shoe repair, laundromat, payment centers & other personal services and vi) education.

Requirements

1. Financial
   • The Franchise fee is generally determined by the profitability of the business. The fee ranges from US$2,000 to US$100,000 and over, depending on the size of the franchise system;
   • Additionally, our Client must pay a one-time front-end franchise fee to the franchisor to secure the privileges of using the business concept, attending their training program, and learning the entire business;
   • Further, there would also be a royalty fee payable by our Client every month. The fee would be roughly around 2 to 10 percent of the profitability of the business or an agreed upon monthly figure.
2. Legal
   • In the Philippines, prior to operating a business as a franchise, our Clients must comply by the directives issued by the Department of Trade and Industry (DTI);
   • The chosen franchisor must be a legal member of any or all accredited franchise associations in the Philippines;
   • Majority of the legal franchisors in the Philippines are registered with the Filipino International Franchise Association (FIFA) which further allows them to enjoy several benefits such as i) using FIFA logo for business resolutions, ii) franchise auditing of existing franchise programs and iii) franchise settlements, among many other benefits;
   • Every franchise must sign a Franchise Agreement between two or more parties through which the Franchisor grants the Franchisee the right to conduct the business under a proposed marketing plan;
   • The franchisor must also have a physical office where-in its franchisees and clients can visit and where the franchisor can assist his employees with their concerns;

Steps towards establishing a franchise

• Since over a decade, Healy Consultants Group have been assisting its Clients to choose the appropriate franchisor by i) conducting a thorough background check of the franchisor, ii) checking the level of demand for the franchisor’s products and services, iii) checking the level of support that our Client will likely receive from the franchiser and iv) ensuring that the franchiser’s business model matches with the business goals of our Client;
• Our Legal and Compliance Department thereafter carries out the due diligence of the prospective franchiser that includes i) securing the business address, e-mail address, website, fax number and any other contact information of the franchiser, ii) a copy of DTI or SEC registration, iii) details of the Board of Directors and Officers and iv) details of the training and the trainees for the franchise;
• Further, the Healy Consultants Group would proceed to schedule a face-to-face interview between our Client and the franchiser;
• Thereafter, our Firm would draft a franchise business agreement for our Client and the franchisor to agree upon and sign up. Following this our Client would become the beneficiary owner and operator of the Franchise;
• Healy Consultants Group highly recommends our Client’s franchise to become an official member of the FIFA. We would assist our Client in securing the PFA membership by:
  • completing and submitting the following documents on behalf of our Client:
    • This application form;
    • Profile of the company;
    • Organizational structure of the company;
    • Copy of the Franchise info sheet and agreement;
    • List of all the franchisees and their contact details;
    • Articles of incorporation and By-Laws;
    • IPO and BIR Registration;
    • Latest financial statements of the company;
    • Endorsement letter by an existing PFA member;
  • scheduling a meeting with the FIFA;
• After a successful meeting with the PFA, our Client’s franchise would secure a membership in the PFA.