What is a Franchise Business?
A franchise business is a partnership between a franchisor (original business) and a franchisee (investor that seeks to buy the right to sell and use the original business’ name, trademark, concept, process, goods, and services).
The International Franchise Association defines franchising as “a method for expanding a business and distributing goods and services through a licensing relationship.”
What happens is a person or company (the franchisor) grants the license to a third-party person or company (the franchisee) to conduct business using the franchisor’s products/services. The franchisor also provides the franchisee with an operating system, brand and support.
Simply put, in a business franchise an established brand/company will allow you to sell its products/services by selling the license to you.
Franchising is a more risk-free business endeavor for newbie entrepreneurs because they don’t need to build a brand and an audience. Because you get to sell products from a known and established brand, the better the chances that your business will not fail.
Another benefit of getting a franchise is usually the company provides franchisees with the equipment and the products needed to run the business as part of the package, so starting your operations will be less of a hassle.
Types of Franchise Business in the Philippines
In the Philippines, there are two main types of franchising:
Business Format Franchise
This is the most common type – where the franchisor gives the rights to things like trademarks, trade names, business processes, as well as the system order, which allows the franchisee to operate the business for a fee.
The franchisors provide a detailed plan, procedures, and guidelines concerning almost every aspect of the business. They also provide initial and ongoing training and support, which is essential to the success of a franchisee.
As you well know, some of the biggest brands in the world offer this type of franchising, with Jollibee, 7-Eleven, and Starbucks among the more popular ones in the Philippines.
Product Distribution Franchise
This type of franchising is very similar to the relationship of a supplier and distributor. Simply put, the franchisor is responsible for providing the product, which the distributor is then authorized to sell.
A notable difference between product distribution and business format is that in the former, the franchisor is only responsible for the product, whereas in the latter, there is also training, support, and access to business processes included in the agreement.
But because of the absence of those things, the franchisee has more liberty in terms of how to run the business.
It’s important to note, though, that while franchisees may enjoy more freedoms, they still need to adhere to guidelines such as selling the products on either an exclusive or semi-exclusive basis.
In exchange for these rights, franchisees pay a fee to the trademarks of the products they will be selling.
This type is often used for larger products like vehicles and heavy equipment.
Pros and Cons of Franchising
Is franchising the right type of business for you? Or are you better off starting a business from scratch and running it on your own?
While it offers plenty of benefits, a franchise business also carries some risks. Weigh carefully the pros and cons of franchising before you decide whether to go for it or not.
1. Recognized and established brand
When you buy a franchise, you have the right to use the franchisor’s trade name and trademark or company logo.
This gives you access to the well-known brand’s customer base, so attracting and finding your first customers won’t be that difficult.
2. Tried-and-tested business model
The business operating systems of franchising brands have been tested in various markets in the Philippines and have already been proven to be effective.
The policies, procedures, and control systems for running the business are laid out in the operating manual—all you have to do is to follow it.
Thus, franchising suits you if you have no background or experience in business management.
3. Easier to get a great location
Having the backing of a large corporation or popular brand makes it easy to get a lease for your franchise business site.
If your target site is a mall, you can easily get approved for a lease because the established franchise brand can draw in more customers.
If you’re planning to start a food cart or kiosk business, location won’t be much of an issue because franchisors typically require just a small space of at least 4 square meters.
4. Training support
Starting a franchise business is a great way to learn how a successful company operates.
Franchisors provide training to help franchisees understand their business model and learn the day-to-day operations, customer service, and use of trade secrets such as proprietary recipes for food franchises.
Franchise packages may also include employee screening and training.
5. Pre-opening assistance
Franchisors help in the pre-opening needs of their franchisees such as site design, evaluation, and construction. Some franchise packages also include assistance for the grand opening.
6. Marketing support
Franchise brands in the Philippines have solid marketing and advertising campaigns in place, and their effects trickle down on their franchisees.
For example, if you get a shawarma food cart franchise, the package might include marketing materials such as a standee of a famous celebrity endorser like Daniel Padilla or Piolo Pascual. You won’t get such a crowd-drawer when you start a similar business on your own.
7. Continuous research and development
No need to worry about spending time and money for product development and innovation because the franchisor will take care of that. You can just focus on operations instead.
8. Faster ROI
Compared to starting your own business, you can expect a quicker return on investment with a franchise business.
The access to an established brand name, customer base, operating system, and all sorts of opening support cuts down the time it takes to recover your investment.
9. Higher chances of success
Running a franchise business has a success rate of 90%, based on a study by the United States Agency for International Development (USAID).
This fact is hardly surprising because all the franchising pros listed above contribute to raising the chances of success.
1. Expensive startup costs
The capital needed to start a franchise business is its biggest drawback. Usually, the initial investment is twice as (or even higher) that for opening a business from scratch.
The following are the typical startup expenses when starting a franchise business.
- Franchise fee – This one-time, upfront fee is what you pay to gain the license to use the franchise brand’s proprietary information legally, such as its trademark, logo, and trade secrets. The more popular the brand is, the higher this fee is charged.
- Royalty fees – The royalty payments for franchise businesses in the Philippines typically range from 3% to 10% of the monthly gross sales. It’s paid every month, so this can reduce your net income. Not all franchisors charge this fee, though.
- Advertisement and marketing fees – These are a small percentage of the gross monthly sales, which are used to fund the franchisor’s marketing support.
- Cost of supplies – Although some franchisors provide the initial supplies as part of the franchise package, franchisees have to keep buying the next batches either directly from the franchisor or its accredited suppliers. This can cost you higher compared to sourcing your own suppliers.
2. Limited flexibility and autonomy
Franchising doesn’t offer much to franchisees in terms of creativity and innovation. You’re bound to follow the rules in the operating manual and franchise agreement.
When you want to do something differently, like switching to a cheaper and more accessible supplier, you’ll have to seek the franchisor’s approval first. If the company doesn’t agree to it, you have no choice but to comply.
3. Lock-in period
Franchise contract terms range from two to five years or longer. Within that period, you’ll be stuck with the company regardless if it’s performing well financially or not.
Renewing the contract depends on the franchisor’s evaluation of your business relationship and your franchise business’ performance throughout the contract term.
4. Business risk
Just like any kind of business, franchising is also a risky venture. Your success will depend on the franchisor’s success. If the company fails, the reputation and performance of its franchisees will suffer as well.
10 Best Franchise Business Opportunities in the Philippines Under P500,000
If you’re on board with starting a franchise business, here are the 10 best franchise business opportunities you can get into.
1. Food Kiosk
Franchise capital: Php 20,000 – Php 30,000
Food kiosks are ideal for people who are just starting in business because they’re affordable. The minimum would only cost you Php 20,000. Furthermore, Filipinos love to eat at food kiosks because it’s cheap and quick but the food still tastes good.
Just find a strategic location where there are a lot of people, usually in malls or train stations. Check out the food carts in these multi-franchise companies:
Below are some of the most popular options (with proven track record in terms of profitability) for food cart/kiosk franchises in the Philippines.
- 534-5845 [Landline]
- 534-5846 [Landline]
- (02) 453-5239 [Landline]
- (02) 453-5240 [Landline]
- 0917-848-3522 [Globe]
- 0922-862-6154 [Sun]
- (02) 340-0156 [Landline]
- +63 917 5594318 [Mobile]
- (02) 470 4083 [Landline]
- 0915-2828213 [Globe]
- 0918-8073575 [Smart]
- (02)509-1049 [Landline]
- (0922)897-3420 [Mobile]
- (632) 998-2114 [Landline]
- (632) 998-2077 [Landline]
2. Coffee & Cold Beverage Stand
Franchise capital: Php 100,000
Even if not everyone drinks coffee (some may be more of a sago’t gulaman person) you can’t deny that a lot of people need and want to drink this caffeine in a cup. A lot of Filipinos also want to drink frappuccinos (especially during the hottest months) but can’t always afford to buy them in big-name coffee shops.
Setting up a coffee stand or cart is one of the best ways to meet coffee lovers’ needs and start an affordable business. People get affordable frappes and lattes, and you make a profit. It’s a win-win situation.
Star Frappe, which offers a franchise package of Php 99,000 for a kiosk, is one of the coffee stand franchises you can check out.
There are also other cold beverages that many Filipinos are so into, here are some of the most popular options:
- 0956-5478845 [Globe]
- 0928-5035228 [Smart]
- (02) 509-1049 [Landline]
- 0918-8889248 [Smart]
- 0917-8098043 [Globe]
- 0923-4563586 [Sun]
- (632) 687 – 4432 [Landline]
- (632) 687 – 4404 [Landline]
- 0906-888-2828 [Mobile]
- (632) 731-8886 [Landline]
- +63 (998) 5589640 [Smart]
- +63 (906) 3856785 [Globe]
- 0932-456-9540 [Mobile]
- (02)376-6052 [Landline]
3. Water Refilling Station
Franchise capital: Php 100,000
Water is a basic need; no one can survive without it, particularly clean and drinkable water. This means that the demand for drinking water will never diminish.
That’s why businesses that supply water in the Philippines make a lot of money. Some of the top water refilling franchises in the country are:
- (02)332-2222 [Landline]
- (02)371-0478 [Landline]
- (+632) 695-3823 [Landline]
- (+632) 239-1701 [Landline]
- 0977-771-6147 [Globe]
- 0921-881-7991 [Smart]
- 0932-119-4522 [Sun]
- +63 2 775 5010 [Landline]
4. Fast Food Restaurant
Franchise capital: Php 300,000
If you have a larger amount of money to invest, you can get your very own small fast food restaurant. Filipinos love to eat. Fast food franchises have been growing in the Philippines since the ‘80s – we even have international food chains like IHOP and Dairy Queen.
These franchises might need more capital though, but there are local food chains like Angel’s Pizza that only require a minimum investment of 300,000 pesos. You can reach out to Angel’s Pizza here. Other popular choices for low-capital fast food franchises:
- (02)912-2973 [Landline]
- (02)912-2946 [Landline]
- 0917-678-0386 [Mobile]
- (02) 815-1823 [Landline]
- (02)654-2929 [Landline]
- (02)654-9001 [Landline]
- (02)654-9002 [Landline]
- 0917-723-3383 [Globe]
- 0923-313-0852 [Smart]
- 0922-860-7159 [Sun]
- 0945-3456957 [Mobile]
- 0943-8700283 [Mobile]
- (02) 367-3097 [Landline]
- (02) 367-3098 [Landline]
5. Spa & Salon
Franchise capital: Php 250,000 – Php 300,000
Everyone needs a haircut or a new hairdo every once in a while, and sometimes people prefer to get their hair done in cheaper salons rather than in big ones like Bench Fix or David’s that charge 200 to 300 pesos for a haircut.
Thrifty people are more inclined to go to less-known salons that offer decent services for sometimes half the cost.
For those of you who have always liked to style themselves, or have been a hair stylist before, you might want to look into starting your own salon. You can now franchise salons for as low as 250,000 pesos.
And with Filipinos becoming more career-focused, a lot of us have also become more stressed. The toxicity at work can become unbearable; add to that the hassle of commuting. People need a place where they can relax and relieve the stress even for just a short while.
Not a lot can afford to take a vacation, so going to the spa has become an ideal, cheaper, and more convenient alternative. This is something that you should consider to invest in as an entrepreneur. Here’s a shortlist of low-cost spa/salon franchises:
- (02) 942 2031 [Landline]
- 0915 194 8975 (Globe)
- 0999 222 8424 (Smart)
- 0917 322 5283 (Viber)
- 0917-812-5836 [Globe]
- 0925.549.3406 [Mobile]
The NailXperts Spa
Franchise Package: Starts at P130,000
- (02)912-2946 [Landline]
- (02)912-2973 [Landline]
- (02)955-0734 [Landline]
6. Vending & Service Machines
Franchise capital: Php 20,000 – Php 300,000
Technology has certainly made a lot of things easier for humans (especially with the inevitable rise of cashless payment systems). And now, even in the franchising space, technology has made business operations far less complex, as some of these business ideas don’t heavily rely on human resources (except for maintenance and marketing).
Below are some ideas to get you started:
- + (02) 232.8946 [Landline]
- + (02) 232.8947 [Landline]
- +63 920-9831-933 [Mobile]
- +63 923-1692-567 [Mobile]
- (632) 821-4667 [Landline]
- +632 (477-3333) [Landline]
Franchise Fee: None (but must have an existing retail or service-oriented business to apply as an agent).
Where to Apply: https://agentportal.westernunion.com/ap/agentregister.do
- 02 888-1200 [Landline]
- +632 448-7671 [Landline]
7. Personal Services: Shoe repair, Laundromat, & Payment Centers
Franchise capital: Php 120,000 – Php 400,000
Practical – it’s what makes these service-based franchise business models very profitable. Many of these services have been a huge part of many Filipinos’ monthly/quarterly routines – given that people are getting busier with work and social activities
And this continuously growing demand is certainly something you can capitalize on. Here are some of the most popular solutions you can provide through business franchising:
- + 63 917-836 3000 [Globe]
- +63 920-966 3000 [Smart]
- 1622-6015 [Landline]
- (0917) – 735 – 0121 [Globe]
- (0929) – 717 – 2996 [Smart]
- (0922) – 697 – 5731 [Sun]
- (02) 668 – 0362 [Landline]
- (02) 232 – 8070 [Landline]
- 0925 – 88 – QUICK (78425) [Globe]
- 0949 – 99 – QUICK (78425) [Smart]
- (02)671-9541 [Landline]
Happy Wash Laundry
Franchise Fee: P160,000
- (046)683-0029 [Landline]
Franchise capital: Php 50,000 – P160,000
Parenting is one of the most lucrative spaces in the world – given that a lot of parents in this generation spend a lot of money to get what’s best for their kids. And supplementary education is definitely not an exemption to this rule.
- +632 8850226 [Landline]
Seriously Addictive Math (SAM)
Franchise Fee: P168,000 (Minimum total investment cost is P250,000 if you have an existing business)
- 0977-8239910 [Mobile]
- 0916-754-0102 [Mobile]
9. Car Wash
Franchise capital: Php 250,000
With so many easy installment plans to choose from, more and more Filipinos are getting a car. Add to that the fact that with Grab and Uber, they can now turn their car into an income-generating vehicle.
With more cars in the country, the demand for car wash services won’t be going down soon. Getting a franchise for a car wash isn’t also all that expensive. If you’re into cars, maybe a car wash business can be for you. Nice Day! Car Wash offers a Php 250,000 franchise fee you might want to check out.
10. Retail & Pharmacy
Franchise capital: Php 99,000 – Php 400,000
Medicines and food supplements will always be needed, so you can’t go wrong with starting a drugstore for a franchise business. People are becoming more aware of generic meds as an alternative to often more expensive brand-name products, which is why generic pharmacies appeal more to the masses.
Starting a pharmacy offering generic drugs not only means good business for you, but it also means you’re giving people more affordable options. Farmacia ni Dok is something you can consider if you want to get into generic pharmacy franchising. They offer a Php 400k standard package.
There are also other specialized small retail stores that you can franchise for as low as P20,000, see our list below:
- 0922-898-4982 [Mobile]
- (02)828-1818 [Landline]
- (02)824-4685 [Landline]
- (02)703-4703 [Landline]
- +63 917 542 9570 [Mobile]
- +63 2 696 0337 [Landline]
- +63 2 532 0018 [Landline]
- (02)821-1111 [Landline]
- (02)821-5304 [Landline]
- (02)383-9951 [Landline]
- (02)387-1846 [Landline]
- 0917-881-69-99 [Globe]
- 0920-983-02-47 [Smart]
- (02)634-05-86 [Landline]
- (+63)9976058630 [Globe]
- (+63)9089923284 [Smart]
- (+63)9333222135 [Sun]
- +632-3283073 [Landline]
15 Premium & Popular Franchise Business in the Philippines:
The number 1 Filipino fast food chain in the Philippines dominates with over 1000 store branches nationwide. Because really, who could resist that langhap-sarap chicken joy?
- Franchise fee: N/A (please contact them directly using link below)
- Initial Capital Investment: Php 35-55 million
- Contact details: Please visit https://www.jollibee.com.ph/Philippines/
This global fast-food giant has almost 38,000 stores worldwide and counting. They serve around 68 million people on a daily basis.
- Franchise fee: USD 22,500
- Initial capital investment: Php32-45 million
- Contact details: Alfred.firstname.lastname@example.org
This globally-recognized oil company started its Filipino roots decades ago. They even had a PBA team around the 80’s and 90’s.
- Franchise Fee: They don’t charge any Processing fee, Retailer fee, and monthly royalty fee for the gas station–however, they charge a monthly royalty fee for gas stations that have Select Shops and/or Lubebay/Service Bays.
- Initial capital investment: Php 5-12 million
- Contact details: (02) 8789-3516 ; email@example.com ; http://shell.com.ph/joinshelltoday
The iconic convenience store is a go-to for folks needing all sorts of stuff on a 24/7 basis.
- Franchise fee: Php 600,000
- Initial Capital Investment: Php 3.5 million and up
- Contact details: 726-9968 ; Franchising@7-eleven.com.ph
The restaurant that popularized “Sarap to the bones” will always have a soft spot for Pinoys.
- Franchise fee: Php 2M + VAT
- Initial Capital Investment: Php 15-22 million
- Contact details: (02) 7849000 ; firstname.lastname@example.org
6. San Miguel Food Ave
You see them whenever you gas up at Petron or at a couple of few high foot traffic areas. Petron Treats was acquired by San Miguel Corporation and this was the result.
- Franchise fee: Php 100,000 VAT exclusive
- Initial capital investment: Php1.5 to 2.5 million
- Contact details: email@example.com
Their local oil refinery is the largest in the Philippines and supplies almost half of the country’s demand.
- Franchise fee: N/A
- Initial capital investment: Php 1 to 9 million (depends on the type of station)
- Contact details: (02) 884-9251
8. National Bookstore
Founded by Socorro Cancio-Ramos in 1942, NBS started as a small stall in the corners of Escolta bridge in Santa Cruz, Manila. Now it has 230 and plus stores across the nation, serving as a one-stop shop for books and school supplies.
- Franchise fee: Php 450,000 plus 1% royalties
- Initial capital investment: Php6.4 million
- Contact details: 02-888-8627
Quicklean is a popular laundry shop that boasts of a one-hour laundry service.
- Franchise Fee: Php100,000 +VAT (plus 5% royalty and 1% advertising fee)
- Initial Capital Investment: Php2.4-10 million
- Contact details: Franchise@quicklean.com.ph
10. Yellow Cab
If we’re talking pizza, we simply can’t count out their famous NY-style rendition all served in a casual dining experience.
- Franchise fee: Php 1.25M + VAT
- Initial capital investment: MALL: Php 10M-12M / STAND ALONE: Php 12M-15M
- Contact details: Franchise@maxsgroupinc.com
The home of thin crust pizzas and world-famous mojos. I can eat those slices of potato goodness all day.
- Franchise Fee: P1,500,000.00 – P2,200,000.00 plus 7.50% royalty and 5.5% advertising fee
- Initial capital investment: Php 18M-25M
- Contact details: 839-0011 ; Fbd@shakeyspizza.ph
12. ML Kwarta Padala Express
With over 2,500 branches across the country, this remittance, lending, and money exchange company is a household name when it comes to sending money across the country or abroad.
- Franchise fee: None
- Initial capital investment: Php 99,000
- Contact details: firstname.lastname@example.org
13. Monterey Meatshop
Operating under San Miguel Corp, this popular meat shop chain has over 400 outlets nationwide.
- Franchise fee: Php 336,000 (Vat inclusive) plus 2% royalty and 1% advertising fee
- Initial capital investment: Php1.5-2.8 million
- Contact details: Anery@smg.sanmiguel.com.ph
14. Mineski Infinity
What was once the country’s premier gaming team is now an actual company that has a couple of Mineski Infinity computer shops operating around the metro.
- Franchise fee: Php300,000
- Initial capital investment: Php 3.2 million
- Contact details: email@example.com
15. Tong Yang
If shabu-shabu is your thing ( I’m referring to the japanese hotpot food, mind you) then you’ve probably dined at Tong Yang at least once. They are one of the most (if not the most) popular places to indulge yourself for some hotpot nirvana.
- Franchise fee: N/A
- Initial capital investment: Php 4 million
- Contact details: 373-8621/23