5 Questions to Ask When Choosing a Franchise Brand
As the father of franchising in the Philippines Samie Lim has said, “The golden age of franchising is here.” Now that the economy is bouncing back from the impact of the pandemic, the franchising industry is gaining more traction. In fact, in the recent annual Franchise Asia Expo 2022, there were around 40,000 visitors and over 500 franchise concepts and brands were represented.
If you are one of the many aspiring entrepreneurs who want to invest in a franchise and run your own business, here are the five important questions you should ask when choosing a franchise brand:
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1| Why do customers choose your brand over others?
Unique selling proposition (USP) of the brand
Today, there are hundreds of franchise brands in the country and thousands all over the world. Buying a franchise that offers valuable and in-demand brand USP gives you a stronger advantage over the competition. An excellent USP makes a brand highly competitive in the very aggressive business arena.
Jollibee has their Jolly Yumburger and ChickenJoy, Bibingkinitan has the famous mini-sized bibingkas, and Shawarma Shack has the buy one-take one shawarma favorites. These are perfect examples of USP that give their brands a competitive edge over other similar concepts.
When choosing a franchise brand, ask the franchisor how they differ from other concepts and why customers would choose them over the others. Knowing this will help you gauge the strength and impact of the franchise brand.
2| What support do you give franchisees, both at the start and on-going?
Franchise support
The beauty of franchising lies in the fact that you are not alone in the business. Your franchisor is there to support and help you along the way. However, not all franchisors offer the same amount and quality of support to their franchisees.
Make sure that you ask the franchisor regarding the support that it gives to franchisees. It’s very important to choose a franchise brand that offers pre-opening, opening, and on-going support so that you, as a franchisee, will be able to succeed in your short- and long-term goals.
3| What’s the financial profitability and payback period?
Profit potential
Let’s say a specific brand has a good USP and support, but if its profitability is weak, it will be a big problem later on. This means that aside from brand USP and support, a franchise should also be profitable enough to provide franchisees with favorable income and return on investment (ROI).
You can ask the franchisor regarding sales figures on a daily, monthly, quarterly, and annual basis to see if the figures make sense for a profitable business. You may also inquire how long will the payback period be for the investment that you put in the franchise.
TIP: Your payback period should be at least half of your franchise contract term. If your contract term is five years, the payback period should be a maximum of 2.5 years.
4| Which locations work best? Can you help me find a location?
Location criteria
Location, location, location. This is one of the determining factors to the success of your franchise business. No matter how excellent the concept is, if it is placed in the wrong location, then it will not flourish. But what exactly makes a location right?
It depends on the nature of the business and the target market. Most food kiosks choose busy locations where there is high foot traffic like transportation terminals, main streets, and more where busy people and commuters require a quick food fix.
Ask the franchisor which locations work best for their franchise and see if the location you are eyeing to lease is a perfect match. Now, if you don’t have any location yet, some franchisors offer location services, wherein they will help you find the best place to set up your franchise.
5| Are you a PFA member or did Francorp or a professional develop your franchise program?
Credibility
In choosing a franchise brand, the most important thing to ensure is that they are credible, reliable, and proven to give the best possible franchise opportunity to their franchisees. These characteristics set credible franchises apart from pseudo-franchise brands or networking/multi-level marketing companies.
The Philippine Franchise Association (PFA) is the voluntary self-regulating body for franchising in the Philippines. Its members are bound by the Fair Franchising Standards (FFS), the Association’s code of ethics, which exhorts members to practice transparency and fairness in the conduct of sale of their franchises. PFA is home to the Philippines’ most trusted franchise brands, many of which already have overseas outlets or are ready to go international. If the franchise brand you are interested in is a member of the PFA, then you can be assured of its credibility and excellence.
When it comes to the franchise program, credible franchise brands normally have their program developed by industry experts like Francorp, a group that ensures that, before a business can grow from one to many through franchising, their operations, systems, and organization are polished and ready for growth so that franchisees will continue with its success and legacy.
Are you looking for the right franchise for you? Sign up for free on How to Invest in the Right Franchise seminar featuring various brands and get a free franchise matching consultation.
Sam Christopher Lim is the current President of the Philippine Franchise Association; CEO of Francorp Philippines; Co-author of 12 Strategies for Franchising book; President of U-Franchise Sales & Management; and Chairman for ActionCOACH Philippines.
