By IRMA ISIP

The Philippine franchising industry contributed P107 billion to the economy between 2005 and 2007, or about 5 percent of total gross domestic product, and employed close to one million workers, a joint study of the Philippine Franchise Association and the University of Asia and the Pacific (UA&P) showed.

An international expert on the industry, Christopher Simnick, however, warned Filipino franchisors of a 75 percent fallout rate of franchise concepts within the past 10 years of their existence.

The trend is reflective of Filipino trait of "ningas cogon" at the same time love of joining the bandwagon like in the "hot" pan de sal craze.

On the part of franchisees, trade undersecretary Zenaida C. Maglaya noted a 65 percent success rate among small and medium enterprises, which become franchisees.

According to the PFA, the Philippines is now the fourth in the world and the leader in Asean in terms of the number of franchise concepts and franchise outlets.

The joint study highlighted the franchising as an important enterprise creator and job generator as well as a promoter of economic dispersal.

The study said that 200,000 franchise outlets were created from 2005 to 2007 with an average 4 to 5 employees hired per outlet or an equivalent of almost a million nationwide.

Bulks of the outlets are located in the national capital region, Central Luzon and Southern Tagalog. Regions 7 or Western Visayas and 9 or Northern Mindanao top the list in the VisMin area.

PFA chairman Alegria Limjoco said with the market still concentrated in Metro Manila, a number of now national brands have originated from the regions like Cebu-based Julie’s Bakeshop, now the country’s largest bakery chain and Iloilo’s Waffle Time.

She said since the introduction of franchising in 1980s, the industry has seen phenomenal growth, with home-grown franchises that started as small now large franchises, among them Jollibee, Max’s Restaurant, Goldilocks, Red Ribbon, etc.

There are more than 20 Philippine franchise companies doing business in Asean, US, Canada, the Middle East, China, India and the UK.

In his speech at the Philippine International Franchise Conference & Expo at the Renaissance Hotel yesterday, Simnick said the Philippines has developed about 900 franchise concepts within the past 10 years, which is a phenomenal growth but still just a third of the 3,000 in the US, with 350 new ones sprouting every year.

Simnick, managing partner and founder of Synergy Franchise Group LLC, said the biggest threat faced by franchisors is that 75 percent of them fail within a 10-year period

He urged Filipino francisors to "be careful" in expanding using franchising as a route, saying, "not every concept is franchisable."

He suggested that local concept holders do "globalization", eyeing the world without forgetting the local impact.

In the same conference, Maglaya noted that among SMEs, it is the franchisees, which have the better chance of flourishing because the operation is "based on partnership and sharing."

For a new entrepreneur with little or no business experience, purchasing is the way to go. Buying a franchise is acquiring a built-in market, a proven product, an entire support system and instant credibility," Maglaya said.

In his presentation, PFA chairman emeritus Samie Lim said food and health are the key trends in the franchising industry over the near-term because of the Filipinos’ pursuit for a healthy lifestyle.

Lim told players that the key to the success in franchising is "innovation and not invention" and for them to think Asean when expanding globally.

"Think beyond the Philippines, think Asean which has 600 million people and one of the fastest regional economies and with trade flowing freely. It is just two or three hours away," Lim said.

In the Philippines, Lim sees the $15-billion Manila Bay Tourism Center as the next franchise destination. The 60-hectare entertainment complex anchored on a casino would be home to various shops and services that can accommodate franchises.

Outside Metro Manila, Lim noted the importance of the roll-on roll off system and the nautical highway in easing accessibility that would bode well for franchises.