Things to know about franchising

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Dear DTI Consumer Power,
Can you please refresh my memory again about the important information that I need to know before I enter into a franchise? I am very interested to buy a franchise but I don’t want to end up losing all my money in the end.
Andrew, Cainta

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Dear Andrew,
Business franchising is one way of expanding a business and investing your money. There are two key players in franchising—the franchisor and franchisee. The franchisor is the owner of the business franchising, while the franchisee is the one who will invest in the business owned by the franchisor by buying, putting up and operating a branch or franchise.

By becoming a franchisee, you will be given the right to use the trademark or trade name and business format of the franchisor. You will also be taught of practical business solutions about the use of trade secrets, ways on how to operate a business customer service, employee’s training and national advertising. Franchisees are also guided on how they begin, run and monitor the assets and operations of the business franchise.

The following are the things you need to look for in determining a responsible business franchise:

1. The franchisor owns the trademark. He must have a document issued by the Intellectual Property Office of the Philippines stating that he owns the trademark being used by the franchise business he is operating.

2. The franchise business is well-established and successful. The franchisor should have his own branches that are earning well and operational for at least over a year. Besides having his own branches, the franchisor must also have franchisees who have invested in his business.

3. It has a clear business operations system. The complete details on how to operate the franchise must be clearly stated in an operations manual that is being implemented in all of the branches.

4. There should be a contract or franchise agreement. It should clearly state all the responsibilities of the franchisor and franchisee. You must not be pressured to enter into an agreement. You are to be given enough time to read and understand the contract or seek legal advice before signing any document.

5. The franchisor is operating a legitimate business. He should have all the necessary papers needed in running a business. The company must be registered with the following:

a) Securities and Exchange Commission, if the company is a corporation or partnership

b) Department of Trade and Industry, for single proprietorship business;

c) Bureau of Internal Revenue, for taxes

d) Intellectual Property Office of the Philippines, for the trademark

e) Social Security System, for employee security and benefits

f) Local government unit with duly issued:
• Mayor’s permit
• Sanitary permit
• Building permit
• Other permits issued by the concerned municipality for business owners and operators

g) Food and Drug Administration, for food, spa, salon, janitorial service and pharmaceutical businesses

h) Department of Transportation and Communication, for Internet café and telecoms businesses

i) Department of Education, for educational and review centers

j) Bangko Sentral ng Pilipinas, for remittance service and pawnshops

6. The franchisor has a physical office. The franchise business should have an office where its franchisees or prospect clients can go and visit and have employees or staff members assist them on their concerns.

7. The franchisor is a member of any distinguished franchise association. An example of this would be the Philippine Franchise Association, among others.

Besides the above-mentioned tips, you must keep in mind to pick a franchise that would put your money in good use. But remember, running a business entails hard work and effort in order for it to prosper.

For more information on franchising, you may contact DTI Direct 751-3330.

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The Department of Trade and Industry welcomes all inquiries, complaints, comments and suggestions from consumers. Call DTI Direct at 751-3330 from Monday to Friday from 8 a.m. to 5 p.m., or visit the DTI website www.dti.gov.ph.

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