20 years of franchising in the Philippines

Manila, Philippines -  Some 20 years back, the then infant franchising industry in the Philippines only had less than 50 players, with 80 percent of them foreign brands.

Now, under the stewardship of the founders of the Philippine Franchise Association (PFA), franchising in the country exploded into an $11 billion industry that consists of over 1,300 franchise concepts, more than 124,000 franchisees and employee base of 1.1 million.

“In the past 20 years, the Philippine franchising industry is likened to an hourglass, wherein entrepreneurs and retail concepts squeeze through the small ‘ring of purification’ to become a franchise, which can now go forth and multiply and create thousands of SMEs and millions of jobs,” Samie Lim, the acknowledged father of Philippine franchising, emphasized.

The success story of the industry dates back to the early ’90s when Lim toured the United States and Europe as head of the Federation of Asian retailers. In the conferences that he attended, Lim learned that franchising is the fastest growing industry.

So in 1993, realizing the potential of franchising as a major economic growth catalyst for the Philippines, Lim and industry pioneers such as Jose T. Pardo and Vicente T. Paterno joined hands and held the country’s first franchise expo. The event grew bigger the following year, giving the then industry bigwigs the reason to create an industry association.

That time, the Top 10 franchisers in the country were only meeting among themselves regularly where they talk about best practices. This small group was convinced by Lim, Pardo and Paterno to spearhead the establishment of the Philippine Franchise Association in 1995. Lim, although he was not a franchiser then, served as the founding father, which is a testament to the efforts he put in to bring together the industry players.

PFA then approached the USAID, through the Private Investment and Trade Opportunities headed by Sergio Ortiz-Luis, and obtained a $10,000-funding support for the creation of an industry master plan using the American example.

“The gist of that study is we identified the 10 different sectors that are best suited for franchising, and we focused on them. With that came the development of local and foreign franchises like Jolibee,” Lim explained.

With homegrown business concepts sprouting, PFA included an incubation pavilion at the annual franchise expo to support the high potential business ideas. Those who got the nod of the PFA screening committee got free booths, thus, giving them free exposure to prospective buyers, investors and partners.

The PFA also talked to the colleges and universities like the University of Asia & the Pacific and Ateneo School Management to dedicate areas for food stalls that were conceptualized by students. And through the Philippine Chamber of Commerce and Industry (PCCI), PFA also launched the Business Ideas Development Award (BIDA). It awarded the best business ideas that were sent by students and gave them free space again at the expo.

Then came the next big thing – financing. “Out of 100 who come forward to say they want to franchise, only five are really qualified because the rest do not have enough money. So we brought in the banks and now we have BPI Family Savings Bank, Banco de Oro, Philippine National, Planters Bank, SB Corp., Development Bank of the Philippines, and PS Bank as the top lenders to the industry,” Lim said.

With funding no longer a problem, Lim said franchisers and franchisees are now also able to acquire multi-brands.

And now, the Philippines is being used as staging point of foreign franchises that are establishing presence in Asia. And more importantly, Filipino brands such as Max’s, Jolibee and Potato Corner are now doing good in the international arena.

The strong growth of the industry was mainly private sector-led as in contrast to the other countries that provide numerous support schemes to their franchisers, the PFA toiled on its own, and even turned it into an advantage. “Since we are basically private sector-led, we are more consistent, unlike the others where policies change when there is a change of government,” Lim further explained.

The Philippines also benefited a lot from PFA’s membership in the World Franchise Congress as the country is able to get experts that give valuable pointers to the industry players during the annual Franchise conference.

“As of this year, we have the largest franchise exhibit in the world — the Franchise Asia Philippines (FAP) 2012. We are able to do this because we are consistently growing. With last year’s World Franchise Conference hosted by the Philippines, the word is now out that if you want to go to Asia, you should go to the Philippines. We are building from last year and I hope we can sustain that,” Lim stressed.

This year’s International Franchise Expo, which is one of the four major components of FAP 2012, will have about 500 firms exhibiting at the 10,000-square meter SMX Convention Center exhibition halls, with over 50,000 visitors expected. Visitors and exhibitors are expected from US, Canada, Guam, Africa, Pakistan, Bangladesh, Middle East, Thailand, Malaysia, Taiwan, China, Japan and Korea.

Lim said he is now seeking to harness the programs of Tesda director general Joel Villanueva to further boost the potential of Philippine franchising.

Lim noted he agrees with Villanueva that Filipinos should change their notion that college diploma is important to be able to land a good job. Lim hopes to partner with Villanueva in launching nationwide several short courses that will serve the employment requirements of the franchising industry. These include short courses for baristas, waitering, and even basic housekeeping.

“With Tesda’s help, we can improve the competitiveness of Philippine franchise concepts because we will have workers that have standardized knowledge and skills. That is what franchising is all about, having professionalized and standardized operations,” Lim added.