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The Battung brother (from left): James, Roderick, Joey and Louie
Franchising allows you to escape the “corporate world” and become an entrepreneur that helps creates jobs and, eventually, wealth. It’s not always easy, but the rewards both financially and emotionally are immeasurable.
Owning over 90 branches of The Generics Pharmacy (TGP), Roderick Battung has not only proven to be a very successful franchisee, he has also generated hundreds of new jobs. Roderick was an employee of pharmaceutical companies such as GlaxoSmithKline and Xeno Pharmaceuticals before he decided to “get out of the corporate world.” He wanted to augment his income as well as help provide employment for friends and relatives, so he naturally turned to franchising.
Like most potential franchisees, he started looking at various industries from food, water refilling stations and gas stations. But after a long search, he decided to go into The Generics Pharmacy because he saw “the potential of the pharmaceutical retailing industry and also felt the sincerity of Mr. Ben Liuson (founder of TGP) in helping franchisees.”
“The business concept has a ‘heart’ and it caters mostly to low income earners, so I saw great potential in this business,” he added.
Decisiveness is key in business, especially when you are franchising a brand that you just know will do well. “One day, a TGP Franchisee (Jojo Macua), who was working at our pharma company, showed me his drugstore located in Tondo. I was amazed to learn that he has more than one branch and was managing it while working. He intimated that aside from profits, the smile they bring to customers buying low-priced medicines gives him much joy. Immediately, I asked my mother to spare me a space in her rented place in our hometown. Jojo helped me accomplish the application at TGP. In a few weeks, the approval came. We immediately recruited a pharmacist, started renovation of the site and prepared our staff.”
Ricky Battung’s TGP branch in Aparri
From the first store, Battung opened numerous branches in Cagayan Valley. When he heard about a franchisee selling a few of her branches in Laguna, he immediately grabbed the opportunity. From there he has since expanded to the Ilocos Region, Laguna, Leyte, Iloilo, Negros Occidental, Agusan Del Norte, Surigao Del Sur, Davao City and other cities.
Being in a franchise that has a very well advertised brand name, steady supply of stocks and low-priced products that caters to many Filipinos in the province, Battung has truly enjoyed his franchise experience with TGP. But of course there are also challenges, so for would-be franchisees, he has a few pieces of advice:
– Go into a business you know and love
– You must be willing to do your share and not rely only on the franchisor. Use your time and energy and talent and capability to make the business grow. Success is not automatic, nor assured. You need to put good business sense into it.
– Choose a franchisor you can trust, and one who genuinely looks after your welfare, wanting you to succeed, and not just interested with your franchisee fee or purchase of their products.
Franchising has helped Battung and many others like him transform from being an employee to being an employer, become more aware of economic conditions of many Filipinos, especially in remote areas, and most especially, have more time for family and personal activities. He now employs over 360 working in the company, many of whom are preachers of the Good News who are able to financially support their ministry through (part-time) employment with the company. And when asked whether it has been profitable for him and if he plans to open more stores, he gives an emphatic “Yes!”
SVP for Marketing and Strategy, Francorp Philippines
There comes a time in the life of a company that an inevitable question comes – with the success of my business, how can I expand to new branches and locations? There are 2 main expansion routes that corporations take. The first is through funding their new corporate owned stores and the second is through franchising.
Expanding through corporate owned stores gives the owner more control over every aspect of the business. It gives the business flexibility to change directions and quickly adopt new policies by issuing new orders to store managers. Given that the store staff are your employees, you have the freedom to instruct them with new policies, new operations as well as reassign them as you wish. In addition, it gives you the predictability of being able to plan out when and where to open your new stores.
This strategy, however, also comes with risks and limitations. First, it is more capital intensive. Whether through savings or new loans, you will need to invest in building new branches and funding it’s operational expenses. In addition, it requires more operational management. Additional expenses are incurred if the corporation has provincial branches. More staff is required in order to efficiently manage these branches, and more employees will increase overhead costs.
The second option for entrepreneurs is franchising. Franchising gives owners access to unlimited capital and time to expand their business. It allows owner to expand using other people’s time, money and people.
(1) Using Other People’s Money If the corporation adopts a franchising business model, then it will expand by using the money of other entrepreneurs. The corporation does not need to enter into a financial arrangement with the bank and/or operate its shares of stock to the public.
(2) Using Other People’s Time. The franchisor works with franchisees who are owners and entrepreneurs in their own right. These owners will run the business just like the franchisor and will manage the operational staff, thus freeing the franchisor from direct operational responsibilities of the franchised stores.
(3) Using Other People’s Network. Business is about relationships, and franchising allows entrepreneurs to tap other people’s network to not only run the business, but create stronger local relationships in their specific localities.
Franchising for all its advantages, however, does also come with disadvantages. Firstly, franchising requires a deliberate investment of the owner’s time and money to develop professional franchise systems. From operations manuals, franchise business plans, legal agreements and franchise marketing plans. Secondly, because franchisors are working with franchisee owners, they cannot always just dictate new directions as they would to employees, but instead should work with these entrepreneurs as partners when implementing new ideas & systems. Lastly, franchisors need to invest time and resources in finding the right franchisee partners to ensure long term success.
Successful companies have usually tried to combine both corporate owned store expansion and franchising to achieve their success. The Generics Pharmacy, for example, wanted to focus on supplying quality products, creating a strong trusted brand and giving value added services in store such as free doctor’s consultations and check ups, so they heavily adopted the franchising model. They were able to grow to 1,800+ stores in just 8 years with over 99% of the stores franchised. Bench, for example, has bene highly successful with their strategy of opening majority company owned stores, while offering key provincial stores as franchises. Many fast food chains on the other hand try to balance with about half corporate and half franchised stores.
There is no one size fit all solution to expansion, the important factor is that entrepreneurs know the advantages and disadvantages of various routes, and understand that healthy growth requires a mix of corporate owned stores and franchised stores. Corporate owned stores help you understand and continuously improve systems and operations and can be used as a test bed for new product introductions and a prototype for new systems you plan to implement. While franchised stores allow for rapid expansion and deeper reach into other cities and provinces. It also brings in top quality ideas as your franchisees are entrepreneurs like yourself, and will continuously look for ways to improve the business.
Chris Lim is the Senior Vice President for Marketing and Strategy of Francorp Philippines (francorp.com.ph); President of U-Franchise Sales & Management (www.ufranchiseasia.com); and Chairperson and Director for Special Projects, ASEAN Integration-Philippine Franchise Association.