PFA reiterates warning on bogus franchise offers

CEBU, Philippines - Although the rate of franchise scams in the Philippines has declined significantly over the years, the Philippine Franchise Association (PFA) is reiterating its warning to companies and potential franchise owners to carefully examine legality of franchise system offers.

PFA president Elizabeth Pardo-Orbeta said the awareness program its initiated with the help of the government through the Department of Trade and Industry (DTI) has helped to minimize the existence of franchise scams in the country.

Thus, PFA and DTI is now intensifying the implementation of Fair Franchising Standard, and that this is one of the priority requirements upon membership of the PFA.

Standardization of franchising system in the Philippines is deemed very important, in order to achieve the goal of making the Philippines the “Franchise Hub in Asia.” Thus, curbing the existence of franchise scams can help realize this goal in a shorter period of time.

PFA is urging the public, especially those who want to take advantage of the opportunities in franchising, to make sure that “they don’t fall into the scams.”

She said it is better to check the company which is offering a franchise package, with the PFA or the DTI, if it has a legitimate franchise package.

Early this year, the DTI implemented that Bureau Order 10-24, in order to weed out the scams in the franchise industry in the Philippines.

Franchisees are asked to take due diligence, which is one of the primary requirements of DTI, in protect investors from being victims of fraudulent Franchisors and Franchisees.

While the franchise system has become the most popular scheme for businesses to grow faster, and for entrepreneurs to have an instant business, it has its own pitfalls that both parties should be careful about.

Serious franchisors or those who offered their businesses for franchise must invest very well in the system, like getting professional franchise consultants, rather than formulating their own packages.

Among other problems that have been happening now in the midst of franchise business popularity, is the unguarded “transfer of technology” that left some franchisors off-hand, and other people have already copied their business model.

In the Philippines, franchising accounted for US$9.45 billion or 30 percent of the retail output in 2010 with over a million employment opportunities generated.

The sector is expected to grow by 20 percent in the next two years, Lim attributed this robust outlook to several factors like the entry of new players from micro, small and medium enterprises (MSMEs), the continued rise of the Business Process Outsourcing (BPO) industry, and introduction of indigenous and food concepts.

Because of the Philippines’ active stance to professionalize the franchising industry, there are now growing number of Filipino brands expanding abroad through franchise platform, such as Jollibee, Cebuano-owned Penshoppe, Bench, Kamiseta, Manels, Goldilocks, Potato Corner, Pancake House, Max’s Restaurant, among others.

Orbeta hopes that more Filipino brands and services concept will be able to conquer the world market through franchising. Thus, it is important for Filipino entrepreneurs to know the franchise system, as this is considered as one of the most effective tools to achieve growth and fast moving expansion plan.

Of the 1,093 Franchised business in the Philippines today, 66 percent of which are homegrown brands, while 34 percent are foreign owned.

The franchise business contributed about five percent of the country’s Gross Domestic Product (GDP). (FREEMAN)