Bagong Thesis

TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA
COLLEGE OF BUSINESS EDUCATION
Opportunities and Challenges

among Food Cart Franchise
Business
Alodia Louise A. Manuzon

Hennessy M. Mosuelo
Shaye Nicole M. Aquino
Statement of the Problem

The study aims to determine the key success indicators of food carts in select
malls in Metro Manila, it will answer the following questions:
1. What is the demographic profile of the respondents in terms of the
following variable:
1.1 Gender
1.2 Age
1.3 Civil Status
1.4 Educational Attainment
1.5 Average Profit (monthly)
1.6 Employment Status
1.7 Location
1.8 Years of the existence in the market
2. What are the significant opportunities encountered in operating food
cart business?
3. What are the significant challenges encountered in operating food cart
business?
4. Based on the findings, what are the key success indicators?

Opportunities and Challenges among Food Cart
Franchise Business
I. DEMOGRAPHIC PROFILE OF THE RESPONDENTS
Name:
Age: ( ) 19-21 yrs. old ( ) 22-24 yrs. Old
( ) 25 yrs. old and above
Gender: ( ) Female ( ) Male
Civil Status: ( ) Single ( ) Married
( ) Widowed ( ) Divorced
( ) Separated
Educational Attainment: ( ) Elementary Graduate
( ) High school Graduate
( ) College Graduate
Average Profit:_____________________
Employment Status:______________________
Location:_________________________________________________
Years of the Existence in the Market:__________________

Name of a Business_____________________________
What particular opportunities and

challenges you have encountered
as to: Respondent’s answer
1. Royalty Fee
2. Return of Income
3. Profitability
4. Suitability of the area to the
target market
5. Product Spoilage
6. Manners of
Communications
1. Government support
2. Customer satisfaction in the
product and service
3. Increasing number of
competitors
4. Continuity of product demand
5. Business Retention
6. Product threats (Seasonal
product)
What are your recommendations for those people who are planning to
open food cart franchise business?
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
SURVEY QUESTIONNAIRE
Dear Respondents,
Good Day! We are graduating students of T.I.P, BSBA major in Marketing
Management. As a requirement of our course, this survey questionnaire forms an

important part of our research project in MK: 008 (Marketing Research) entitled:
“Opportunities and Challenges among Food Cart Franchise Business”.
In line with this, we have chosen you to be one of our respondents of this
study and we hope that you will take time answering the survey questionnaire forms
honestly. Rest assured that all data gathered will be treated with utmost
confidentiality and will be used for academic purposes only.
Thank you,
The
Proponents
CHAPTER 1
THE PROBLEM AND ITS BACKGROUND
I. INTRODUCTION
Franchising has evolved over the years and has become the most
popular form of business ownership today. Franchising is a form of

business which the company’s owner or franchisers gives license to
distribute products, services or methods of business to affiliated
dealers, franchisee. In this approach, a franchisor provides the
franchisee with a proven method for operating a business using the
name and trademark of their company. The company will usually provide
a significant amount of assistance to the franchisee in starting and
managing the business. The franchisee pays a fee or royalty in return.
Typically, a company also requires the franchisee to purchase supplies
from them.
In today’s world, food cart industry hailed as today’s top small
business to start in the Philippines. The absence of complex
requirement and up, offers an interesting option for people who are
aiming to test the “business waters”. It is suitable for those people who
want to try opening a small business with a low capital.
There are some businessmen and businesswomen who have
thrived and successfully transform their lives through franchising.
Venturing into franchising has its. Benefits and drawbacks. That’s why
we conducted this research about Success Indicators among Food cart
Business to fully know how they able to grow their business.

Background of The Study
In recent years, Philippines is deemed to be the franchising hub
of Asia where franchising business has made remarkable growth in the past
few decades in sectors including food cart. Food cart franchising business has
become one of the most popular operating strategy for companies competing
in the local and foreign marketplace. Viewing upon the market trends and
greater revenue prospect, food cart franchising business is thriving in the
Philippines as well because this is very popular and very lucrative since it’s
suitable on those 5 social classes of people and because most consumers
usually consider snacks as staples, particularly street and fast food.
The food business has dependably increased more ground than
different types of business simply because it addresses to a fundamental
human need – food. There are numerous ways for setting up a food business
and one of these examples, is to franchise a food cart business in which you
will going to run a business by using the system and trademark of your
selected franchisor. Perhaps, it is really a great help for those people without
knowledge in starting up a business because you are already riding in an
already successful business system. Everything is set, you must follow
directions.
Aside from this successful business model is the brand recognition and
reputation, advertising and support from the franchisor you can relish in. It can
also be easily spotted anywhere. From MRT and LRT stations down to every
corner of the street in the local Barangays, schools, and churches and in every
corner inside the supermarket, so it would not be hard for you to find a place
where you would place your food cart. You just need to know what your target
market is.
Franchising offers several advantages not only to franchisors but also
to franchisees which helps explain why franchising has been so successful.
Franchisors benefit from these agreements because they allow companies to
expand much more quickly than they could otherwise. A lack of funds and
workers can cause a company to grow slowly. However, through franchising a
company invests very little capital or labor, because the franchisee supplies
both.
Likewise, franchisees reap a variety of benefits from franchising. As
noted previously, the franchisee faces much less risk through franchising a
company, than through starting a business from scratch, according to many
studies. The lower risk is related to other advantages of franchising that stem
from being affiliated with a proven company.
Furthermore, if their brand is remaining its success to the market,
franchisors can expand their business very rapidly, and can reap enormous
profits in the process while the franchisees do all hard work to keep their
brand being highly favored

A company also can ensure it has competent and highly motivated
owner/managers at each outlet through franchising. Since the owners are
largely responsible for the success of their outlets, they will put a strong,
constant effort to make sure their businesses run smoothly and prosper. In
addition, companies can provide franchising rights to only qualified people.
Moreover, franchisors can raise money without selling shares of their
companies through franchising.
Not because there’s a lot of advantages in franchise business it doesn’t
mean that it is easy to manage. At the back of those successful journey of
different franchise business there’s a hindrance that they may encountered. If
you buy a franchise it means it is ongoing sharing of profit with the franchisor,
there are usually restrictions on where you operate the product you sell and
the suppliers you use. Also, franchise agreements dictate how you run the
business, so there may be little room for creativity. That’s why as a marketing
student of Technological Institute of the Philippines, the title: Success
Indicators among Food-cart Franchise Business is very much suitable for us
because we will be able to find out what are the pros and cons of entering
food-cart franchise business and how the operators retain their success and
faced the problems they have encountered.
Conceptual Framework
Product
Production Price
KPI
People Place
Figure 1. Research Paradigm
The research paradigm directs and guides the research study. In the
conceptual model (see Figure 1), Those who are familiar about the ‘marketing
mix’ can very easily identify the important P’s for effective marketing of any
product or service. Those P’s are: product, price, place, people and promotion.
It is also a key performance indicators of a successful food cart franchising
business because by considering those 5P’s, it can bring your venture to
success and profitability.

Hypothesis
1.There is no significant difference between the opportunities in operating
a food cart business based on the contents of the book and the responses
of the food cart operators.
2. There is no significant differences on the challenges encountered in
operating food cart business based on the contents of the book and the
responses of the food cart operators.
3. The assessment of handling the pros and cons of the operators of food
cart franchise business has a significant difference based on their
demographic profile but has the same rationale.
Scope and Delimitation
The focal point of this study is the different experience of the select
Food-cart Franchise Business both internal and external. Their experiences
and suggestions will be used and help a lot of future entrepreneurs in handling
food-cart franchise business.
This research has the following limitations:
While there are many food-cart businesses existing, the researcher
chooses only (5) respondents who are the operator of selected food-cart
franchise business. This research will only focus on the success of franchisee
that’s been exist to the market 5 years above. The specific location where the
survey of this research will be conduct is only inside the mall.
Significance of the study
The significance of this study will be us follows:
Individuals
This research will provide them information when they plan to be a
franchisee, this will help them a lot in studying the possible consequences and
factors in putting up food cart business and to assess themselves whether
they have the potential to be a successful franchisee.
Franchisor
Franchisor can perceive how the franchisee handle those possible
problems they may encounter and how they maintain the image of the
business that will lead them to be a good franchisee.
Business administration students
It provides further insight where the students who are taking business
administration will consider the output of this study, this will allow them to learn
and review the different strategies of each successful franchise business. It
can be used as a reference in their studies regarding franchise business to
provide them an utmost information and better understanding and equip them
with knowledge.
Professors
With this study, they will be able to enhance their teaching capabilities
and will be able to integrate new teaching strategies upon discussing the
success of different franchise business.

CHAPTER 2
REVIEW OF RELATED LITERATURE
This chapter will help the researchers to assimilate and understand the
concepts of the study. It presents the review of related literature, review of
related studies, and the relevance of the review related literature.
Foreign Literature
Franchising has attracted the attention of many over past years and the
tough economic climate has highlighted its strengths and shown that there is a
more secure way to start your own business. Its formula of a locally owned
and run enterprise, driven by a small business owner, with branding,

economies of scale and support from the wider network, gives the business a
far better chance of success. According to academia.edu, 2014franchising is a
way to grow business operations. Franchising allows a business to get its
products or services to wider markets through the endeavors with the business
partners. Franchising has been conquering the world during the past few
decades without the masses really knowing of its existence. It is a poorly
comprehended type of business ownership and method to grow existing
business. To completely understand what franchising all about one is really
must closely study the concept and/or throw oneself in and experience it first
handed. The beauty of franchising is in the win-win situation that both parties
have in the business; franchisor (owner) who seeks to grow the existing
business with little financial input and franchisees who are ready to spend the
money to do a business without having to start from scratch.
The greatest benefit to a franchisee is the reduction in his risk of
business failure. As an ethical franchisor should have proven the business
concept in the marketplace prior to franchising by way of a pilot or other
trading experience, most of the obvious problems should have been solved
and, therefore, the risks to a franchisee minimized. It is statistically proven that
far fewer franchisees fail within the first three years compared to over 90 per
cent of other new business start-ups. (sellingafranchise.co.uk, 2014)

Smallbusiness.chron.com, 2014 stated that customers know this and seek out
the reliability and familiarity of their favorite brands, which have been
established over years or decades. According to the article of Small Business
by Megan Martin the biggest benefit of owning a franchise is brand
recognition. Most if not all franchises are well- known companies with
established customer bases. Owning a franchise instead of starting up a new
business saves you the time and effort of building a reputation and attracting
customers. According to betheboss.ca, 2014, a franchisor can provide teams
of real estate experts, advanced site selection software, and years of
experience in finding the best sites for their brand. Franchisors can provide
expert site selection assistance based on their operating experience and
demographic knowledge. Landlords and developers prefer to deal with
someone who has an established track record. This enables franchises
owners who are part of an established franchise system to obtain prime
locations in major malls and other developments that otherwise would not be
available to them as an independent operator. Franchisors provide
franchisees with a wide range of help in the areas of administration and
general operations. The entrepreneur who becomes a franchise owner is
instantly armed with proven products and production systems; inventory
systems; financial and accounting systems; and human resources guidelines.
Many franchisors also provide management training to new franchisees, and

ongoing seminar workshops for established owners. (definitions.uslegal.com,
2014) A franchisee can typically buy goods and supplies through the
franchisor at a discounted rate -- everything from cleaning supplies and
uniforms to food products and ingredients. Franchisors that purchase products
and services for their franchise network have the power to negotiate significant
volume discounts from vendors and suppliers. The result is a competitive
advantage that results in higher operating margins for each franchisee.
(franchising.com, 2014) Sellingafranchise.co.uk stated that the franchisee has
access to quality training and assistance to establish his business from day
one thereby avoiding many of the pitfalls and mistakes of the independent
businessman setting up from scratch. The ongoing support and advice from
the franchisor provide a valuable resource for franchisees often allowing them,
for example, to do much better in a recession than other businesses.
Local Literature
Review of Related Literature Local Literature According to Samie Lim,
from the article of Business Today (Feb.18, 2008) Franchising is considered a
powerful tool for economic development. It creates thousands of enterprises
as well as millions of jobs. It also helps fuel the growth of entrepreneurship.
Samie Lim, chairman emeritus of the Philippine of the franchise Association
and a chairman of francorp Philippines, shares that here are three major
reasons why franchising works.

Franchising he says, uses three of the most limited resources to
expand one’s business. These are other people’s money, time, and other
people’s organizations for its operation. The franchisee would be the one who
would Shell out the money to open another outlet of the franchisor. He would
pay all the expenses for its operation. By other people’s time he means that
the franchisee would be managing the business while other people’s network
or connections would make it easier for the franchisee to run the business.
“He knows the local government authorities, he knows the customers.
Knowing the people in the community creates lots of advantages,”
Lim simply describes that buying a franchise is acquiring a trusted
brand with a consistent quality. It provides assurance to customers that they
would be getting the same value whenever they purchase that brand.
Franchising also thrives amid challenging times. Studies show that franchising
grows even faster during times of recession as it also remains robust despite
the odds. Franchising also has a 90-percent success rate compared to
traditional retail (or your own business) which has only 25-percent success
rate after 10 years of operation. So, for non- franchises businesses, 75-
percent are not expected to succeed after a decade of operation.
From the article of Philippine daily Inquirer (June 25, 2010) Magapayo
states that, “the safest way for first time entrepreneur is to go franchising”.
Say’s Voltaire Magpayo owner of the food cart business Sweet Corner. In
recent years, there has been a significant increase in franchise business in the
Philippines notably in the food and cart industry. According to the Philippine
franchise Association (PDA), “franchising in the country began in 1980’s, with
the sector pre-dominated mostly by foreign franchise companies. From around
20 foreign and local franchises, the sector rapidly grew, with the figure
reaching around 1000 by 20008.
Looking around malls and other commercial centers, home-grown
concepts are dominating the local franchises with food and cart businesses
leading the pack. Initially, the cart businesses were ruled by food and
beverages, this day’s even photo printing is offered in carts- carts getting a
new meaning. Still, food makes an impressive 41 percent in the franchise
sectors, service establishments 32 percent, and retail outlets, about 27
percent. Magpayo said franchising is not only safest but the easiest way for
startup entrepreneur for one a prospective franchise only needs a couple of
hundred thousand pesos to start a business he explained, for sweet corner we
only require P185, 000 inclusive of the cart, business name, it’s not labor
intensive as one cart needs only two person to main the stall, because its
ambulant you can change location and its everyday cash.”
According to Dti dateline (August 31, 2009), Franchising robust despite
global crisis, AFFI President and Binalot owner Rommel Juan states that
franchising is the “most practical and least risky route for entrepreneurs to go
into business,” as franchises are “trusted businesses with proven concepts
and operating models.” Those who do not have any experience with business
are thus spared of the difficulties of having to start up their own, which is
riskier and more difficult route. Franchises are like plug-and-play Businesses
that enable entrepreneurs to start their business right from the first day of
operations. “
Franchises in the country have an estimated 95% success rate on the initial
year of operation, a recent study said,” Franchising is something tangible
people control during crisis”. Association of Filipino Franchisers Inc. (AFFI)
Public Relations Officer and Bibingkinitan owner Richard Sanz said. Juan said
applications for franchises have also increased this year despite the economic
downtown.
According to Philippine Franchise Association chair and Francorp
Philippines chief executive Algeria Limjoco, “the industry remained optimistic
despite the overall doom-and-gloom situation, as the franchising business was
not likely to be as hard hit as other industries”. Despite the economic crisis, the
local franchising industry expands and even extends its reach to foreign
markets. The franchising industry, in fact, could provide returning overseas
Filipino workers and even retrenched workers the opportunity to remain
productive and generate much needed-income. “Franchising does well in good
times, and even bettering challenging times.” She said. With our young and
large population whose need are fully matched by the products and services
of the highly creative members of the PFA, market demand will remain up and
the economy can post decent growth,” she added.
According to Robert Trota, president of the Philippine franchiser’s
association says the key to this first world vision was “a large armada of
entrepreneurs rather than any army of our labor force staying as employees
for life.” Fourteen years after a group of small retailers paved the way for
making franchising an Institution in the Philippines, franchisers are looking at
this business approach than important push along what the Arroyo
administration describes as the road to becoming the first world country. Trota,
who is also president of Max’s franchising Inc. that owns the Max’s chicken,
said franchising provides the way for people to put up a business with capital
us low as P300,000 or even P150,000.
“Not only has that, franchising allowed (neophyte) entrepreneurs
access to business models that have proven track records,” he said. “That is
why they observed a 90- percent success rate among out of franchises in the
country.” From Entrepreneur Philippines Magazine, (May 2009) According to
dela Costa, there's no industry standard for cart size, material requirements,
and design, although food carts must use certain basic food-service safety
materials. Some malls will require your cart to be 2 meters x 1 meter; others
may want it 1 square meter. It all depends on the location and your agreement
with the lesson.
Here, dela Costa shares his insights and tips on starting a food cart business:
In putting up a food cart business, the first thing to consider is the product you
will be Selling. It could be an exceptional product, maybe a family recipe not
known to many, perhaps an innovation or variation of an existing product, or
simply a very affordable product. Your choice of product will also determine
the equipment you need. Let's say you want to sell flavored French fries; it will
mean getting frying equipment and a strainer.
Your product, of course, will also determine the concept design for your
cart. You can buy ready-made food carts or customized ones. The food cart
maker will ask you for the specifications, such as the size of the food cart, the
size of the selling area, the type of materials you want for the countertop and
for the signage, and the equipment your cart will need. These are just the
basic specifications. Custom-made designs will require you to give more
information to the cart maker. Some cart makers would be happy to help you
design or conceptualize your cart and its signage.
Once you’ve decided on your product and cart design, you can choose
your location. Many food carts are in malls and MRT stations; others are in
office buildings, school canteens, terminals--in fact, in any area with high foot
traffic. Aside from the foot traffic, you also need to consider the lease contract
and rent. Choose a lease contract that gives you a lot of leeway in promoting
your business; as to the rent, it should be affordable and within your budget.
You'll only need one or two persons to run each of your food carts, but you
must carefully choose your staff. They should be trustworthy, conversant,
pleasing in personality, meticulous, and able to do basic arithmetic.
Make it a point to thoroughly train your crew on the product as well as
on hygiene and sanitation. As important, you must be a hands-on owner. Visit
your store frequently and do the inventory yourself. This way, you can
effectively monitor the cash flow of your business and continuously improve
your product.
According to Brown, Richard S. in the Academy of Entrepreneurial
Journal (January 1, 2009), Differences in industry structure can help to explain
divergences in the strategic planning that new ventures undertake.
Considering that entry barriers are lower in highly fragmented industries, one
would expect to find that many new entrepreneurial firms gravitate toward
these industries. Among the topics that are key to this issue is that of a new
firm’s strategic planning and, more specifically, its strategic marketing. The
strategic marketing plan for a new venture is crucial to firm survival for several
reasons dealing with the nature of scarce resources in startup companies.
Resources such as brand name, financial capital and founder experience are
central to many startup firms. However, there are few instances where all
three are present at the initial conditions of firm founding. Foreign Literature
To optimize a firm’s survival, founders must utilize their scarce
marketing resources efficiently and effectively or risk failure through death or
substandard profits. In a fragmented industry, one way to maximize firm
exposure is through franchising. Franchising can also be viewed as a
technique to maximize the problem of newness Stinchcombe 1965) that many
small firms face. Therefore, franchising can address several issues pertaining
to both small, new firms and fragmented industries. First, in an environment
that approaches perfect competition, franchising can consolidate sellers by
placing them under a common umbrella.
Secondly, franchising can allow a startup to have instant brand
recognition giving it validity and legitimacy (Terre berry 1971) through
acquisition. Thirdly, franchising can act as a management mechanism for the
franchisor by delegating the franchisee as a de facto corporate manager even
though the franchisee is technically a proprietor.
According to agency theory arguments, from the article of SAM
Advanced Management Journal (September 22, 2009), securing a compatible
franchisee minimizes potential losses and failures in the system resulting from
franchisee misconduct. Olm et al. (1988) postulated that for a franchisor to
succeed, the first critical task is to develop the right team. Xiao et al. (2008)
state that education of the franchisee is also an important criterion. The
strategic alliance literature also reveals that resources alone cannot bring
competitive advantage, but complementary also reveals that resources alone
cannot bring competitive advantage, but complementary resources can
contribute to the strategic fit of partners in the franchise alliance (Chathoth and
Olsen 2003 and Alitany (2006).
According to resource-based arguments, franchising by default requires
external finance, human resources, managerial talent, and local knowledge
provided by the franchisee to help the firm gain a competitive advantage and
create value (Caves and Murphy 1976; Combs and Castro Giovanni 1994;
Martin 1988). Olm et al. (1988) suggest that franchisor adopt a combination of
the agency and scarce considerations when awarding a franchisee to ensure
cooperation, curb optimism, secure commitment, and enhance the likelihood
of franchisee satisfaction. Xiao et al. (2008) observed that the resources a
potential franchise brings to the alliance, the more likely they will be accepted.
Frazer and Winzar (2005) implied that high initial costs help the franchisor
keep the franchisee locked in the system.
McKay (2005) offers another consideration for the success of the
system, namely the personnel attributes of the franchisee. In another study of
the East Asian retail system, Choo et al. (2007) suggest that franchisors select
franchisees who can demonstrate strong financial ability, a prized location,

and local market knowledge. According to Rahatullah (2007), franchisors
assign least importance to the potential partner’s technical competence.
These studies show that active, efficient, and effective participation by the
partners in a cooperative environment is required, but as Bergen et al. (1992)
point out, the onus of success largely depends on the franchisor’s ability to
select franchisees with the right profile.
Therefore, franchising should seek franchisee who are cooperative,
willing to follow decisions, policies, and instructions, are good performers,
responsible, and supportive. Franchisors often use selection criteria as a
strategy to control inputs (Bergen et al. 1992; Eisenhardt 1985). The literature
such as Wattel (1968); Tathem et al. (1972); Axelrad and Rudnick (1987); Olm
et al. (1988); Kaufman and Stanworth (1995); Jambul Ingham and Nevin
(1999) suggest that the various criteria for partner selection in franchising can
be approached from three angles, 1) character evaluation, 2) entrepreneurial
traits, and 3) desire for personal development by the applicant.
According to Abha Garyali (April 26, 2010), considering the current
franchise scenario in India it would be appropriate to say that the international
players dominate the industry especially the Food and Beverage sector. There
are numerous factors contributing to the growth and success of international
franchisors in India. Franchising is considered as a profitable venture is being
opted by the foreign players to expand their business globally. According to

the Top 100 franchises by The Franchising World Magazine, a total of 21
franchisors belonged to the F&B sector. It was interesting to note that out of
these 21 brands, 12 players were of would not be incorrect to state that a
major chunk of Indian food franchising is still dominated by the international
franchisors.
These are the factors favoring International players. India being an
emerging market: As India has a huge untapped market potential, especially in
the franchise industry, therefore, many foreign franchisors are targeting the
Indian markets. India being the engine of economy for the foreign investors is
also attracting the international players to enter the country. Changing
lifestyles and preferences of Indians: Another contributory factor for the
success of these foreign F&B players is due to the change in the lifestyles of
the consumers. There is a rapid increase in the spending capacity of the
middle class due to increase in disposable income. The Indian consumers
spend around 51 percent of their earnings on food and beverages.
Moreover, the preferences of Indian consumers have also changed.
Now-a-days people prefer trying out different cuisines rather than the regular
Indian dishes. Majority of youth population: Almost three-fourth of the nation’s
population consists of the youth. Youngsters are the main consumers who
desire to eat out and try different cuisines. Therefore, the growth in this
segment has propelled foreign players to enter with their own unique cuisines.
It can be said that the presence of these international franchisors has
propelled the Indian franchisors to expand via franchising. The entry of the
foreign brands has added to the growth of the food franchising industry in
India.
Foreign studies According to a recent report by the World Franchise
Council, the Franchising and Licensing Association of Singapore (FLA)
reveals that the sales turnover of Singapore- based franchises, both local and
foreign, accounted for approximately 18% of the total domestic retail sales
volume in 2008. “The total market value of Singapore’s retail sector (including
the education sector) is estimated at S$44.6 billion (US$34.2 billion) for 2008,
giving the franchise sector an annual turnover of about S$8 billion,” the
industry body states. Not only has the industry contributed significantly to the
local economy, the number of franchise businesses have grown from 380 in
2003 to about 500 concepts last year, says Pang Jielong, director of local
franchise Yogurt Place Pte Ltd, which has six outlets island wide and its own
factory that manufactures Greek yoghurt. “That is around a 30% increase in
just a six-year period,” he explains.
The F&B sector in Singapore, including restaurants, contributed S$1.91
billion (or 0.74%) to Singapore’s GDP in 2008, reveals Kenneth Low of
Kitchen Language Pte Ltd, the F&B arm of local property group Far East
Organization, which holds the master franchise for sandwich chain Quiznos
Sub and Tully’s Coffee, among other concepts such as modern Italian
restaurant brand Ochre and Japanese kaiseki-style restaurant Kumo.
“According to a survey by Euromonitor, more than 50% of Singaporeans eat
out at least once a week. And as Singapore enjoys one of the highest per
capita income in Asia, the demand for F&B products in Singapore far exceeds
the population of four million people,” Low observes. While the figures remain
impressive despite the nascent industry, businesses here are coming around
to the fact that aside from introducing new and interesting concepts into the
city-state, franchising also provides lower business risks and improved
profitability.
Says Low: “In taking on a franchise, the risks are minimal as the brand
equity would have already been established with a successful and proven
track record to show for. Usually, the master franchisor would provide the
knowledge and tools needed to run the business, such as assistance in staff
training, procurement of supplies, store layout, marketing support, operational
systems, R&D and so on. This works like a ‘fool-proof manual’ where any lay
business person could use and run the business.”
Foreign Studies
Business format franchising is becoming an increasingly international
activity. From 1971 to 1985, U.S. franchisors added foreign outlets at a rate of
17% per year, almost twice as fast as they added domestic outlets (Aydin and
Kacker 1990). As a result, by 1990 more than 350 U.S. companies had more
than 32,000 franchised outlets overseas. By 2000, 60% of all franchisors in
the United States are expected to have outlets overseas (Hoffman and Preble
1993).
This study examines the 815 largest U.S. franchisors to understand
what capabilities encourage them to expand overseas. It finds that the key
capability that predicts the intent to expand overseas is superior capability to
reduce franchisee opportunism. Franchisors who seek foreign franchisees
have developed a greater capability to bond against and monitor potential
franchisee opportunism. The data show that these differences are consistent
across all industries in which franchising takes place.
The results of this study indicate that foreign entrepreneurs can identify
the American franchisors most likely to expand overseas by looking at their
pricing structure and their monitoring capabilities. The easy identification of
characteristics from which to find American franchisors will help to reduce the
search costs of potential foreign franchisees. This reduction in search costs
will make the establishment of international franchise relationships less
expensive.
This study also provides guidance to franchisors interested in
expanding overseas. The results show how franchisors can structure their
franchise relationships to reduce potential franchisee opportunism. This ability
to reduce franchisee opportunism will make it easier for franchisors to enter
high-growth foreign markets using the franchising business mode.
This study also has implications for researchers. It suggests that
international business research examine further the mechanisms by which
firms make contractual modes of international business work. Whereas many
firms may internalize international market transactions under conditions likely
to lead to market failure, the large number of franchisors who use franchising
as an international expansion mode despite conditions of market failure
suggests that more attention be paid to mechanisms that companies can use
to reduce the probability of failure of international contractual transactions. By
helping to explain how franchisors monitor foreign franchisees or bond them
against opportunistic behavior, this study suggests that the international
business literature develop a more complex understanding of the workings of
international business transactions than the simple choice of internalization or
contractual entry modes.
Local Studies
Small capital, easy set-up and a good chance of success are just some
of the reason why Food Cart Business is thriving in the Philippines. If you will
look at the market trend today, Food cart business is the choice of most
aspiring entrepreneurs. A mobile food cart is a business where you can start
on low capital ranging from P30,000 to a maximum of P300,000. But it could
be a little lower though, depending on how you will put it up — by franchise or
on your own. Some companies offer food cart franchise for as low as P10, 000
per package that includes, the cart, product, uniform for the crew and training.
(foodcartlink.com, 2014) Pinoy-entrepreneur.com, 2014 stated that Master
Siomai is a food cart business developed by Masterrific Foods. The company
was established in 1999, started out by supplying processed meat products
such as Ham, Bacon, Burger Patties, and specially Siomai to hotels,
restaurants and market places in Metro Manila and nearby provinces. Their
food cart and franchise business under the name of Master Siomai started last
May 2007.
According to the study of Cuasay (2012), every businessman gives
emphasis on their target location because everything depends on it. If a
businessman/woman had a plan of having a large market and has a good sum
of capital, businessman must look for a wide accessible place. With all these,
the number of hired staff and employees should be in this kind of business,
consumer satisfaction should be the very priority and everything else lies
behind it. Selection of the right location for a proposed franchise outlet can
mean the difference between success and failure and can be crucial factor in
whether a franchise will be a moderate or a big success. Location theories

often claim that the three most important criteria for the success of any
business are location, location and location! This concept applies to franchised
business as well. If a business person lacks the knowledge and skill
appropriate to the business field and is also a poor manager, if the franchise is
most assuredly on the road to failure. The franchise has a good location,
however there is a chance the business might succeed even despite the
owner’s shortcomings (Judd and Justis, 2012)
Business Operations Based from the study of Cuasay (2012), as with
any business a company is only as good as its employees. Unfortunately,
employees are subject to sickness, injury and many other issues that keep
them away from their jobs. In addition, employees need to be motivated to
produce desired results. Unmotivated employees lead to a decline in quality
work, product consistency and productivity. Managerial inexperience and
incompetence account for almost 90% of small business failures. These
weaknesses of management manifest themselves in several ways, like lack of
ability to supervise and direct others, lack of capital, an indication of poor
financial management, lack of stability in sales promotion and sales
management techniques, lack of ability to collect bad debts and curtail unwise
credit policies. Machine or equipment is the basic tools to produce goods or to
generate services. Selection of an appropriate machine not only enhances
efficiency but also saves time and increase revenue. Tailoring the
requirement, availability of spare parts, evaluation of after sales services,
substitutes and technology and the organization budget are the crucial criteria
while purchasing a machine. Maintenance and overhauling issues along with
its life span also cannot be overlooked. Maintenance is the cost of maintaining
machines and equipment in good working order, including repairs, overhauls
and spare parts. Routine maintenance is often the subject of a long-term
contract at a fixed annual fee.
Many small businesses don't survive beyond their fifth year of
operation. There are several reasons for this, including inexperienced
management. Small business owners must often juggle multiple
responsibilities, such as employee relations, sales, accounting, customer
service, inventory, marketing, and advertising. Business owners also need to
understand and identify unique factors related to their local markets and
customer base. Those who wish to take the entrepreneurial route with an
existing business can go into franchising. These types of opportunities may
present less risk due to the visibility of a name brand and co-marketing
support. Licensure may be required for certain types of franchise-based
businesses, depending upon the jurisdiction and type of operation.
(study.com, 2014)
The following describes the four P's of marketing: Products are the
goods and services that your business provides for sale to your target market.
When developing a product, you should consider quality, design, features,
packaging, customer service and any subsequent after-sales service. Place is
regarding distribution, location and methods of getting the product to the
customer. This includes the location of your business, shop front, distributors,
logistics and the potential use of the internet to sell products directly to
consumers. Price concerns the amount of money that customers must pay to
purchase your products. There are several considerations in relation to price
including price setting, discounting, credit and cash purchases as well as
credit collection. Promotion refers to the act of communicating the benefits and
value of your product to consumers. It then involves persuading general
consumers to become customers of your business using methods such as
advertising, direct marketing, personal selling and sales promotion.
(toolkit.smallbiz.nsw.gov.au, 2015)
Chapter 3
METHODOLOGY
This chapter clearly defines the research methods used to conduct the study.
The researcher explains how the necessary data and information to address
the research objectives and questions was collected, presented and analyzed.
Reasons and justifications for the techniques data presentation techniques
and analytical techniques used are given.
Methods of Research Used
For this research process, the natural choice was qualitative methods
since the research question concerned the success indicators among food
cart franchise business. Requirements are best disclosed by using non-
numerical data.
At starting point, the descriptive approach in this qualitative research is
a description of realistic life. This includes food cart operators to shred their life
on how their business boom in the market. We aim to study the subject as
comprehensive as possible and our goal is to find out or reveal facts rather
than verify already existing facts or claims.
Descriptive method gathers qualifiable questionnaire which is also a
way of interviewing to collect information due to the direct linguistic interaction
with the source of information. The biggest advantage of this, is the flexibility
that it brings to the data collection. In qualitative researches an interview is
usually a main method of data collection. The reliability of interview

undermines the fact that interviewees tend to give valid information as
possible.
Population and Sampling Techniques
The target population of the research study was food cart franchise
business operators. The findings of the research are only were generalized to
selected food cart franchising business.
Non-probability sampling was employed, as the research was
completed with the accessible selected food cart franchising business, as this
was readily accessible. The entire population of all food cart franchising
business here in the Philippines was impossible to access. In non-probability
sampling, the focus lies on the research reaching a saturation point, rather
than reaching a certain number of interviewees.
Purposive sampling was also used that it ensured that all elements of
the sample contributed to the research in terms of relevant information, which
thus benefited the research study.
The samples are taken from the (5) selected successful food cart
franchising business which are located here in Manila.
Research Instrumentation

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TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES - MANILA

COLLEGE OF BUSINESS EDUCATION

Opportunities and Challenges

Alodia Louise A. Manuzon

Statement of the Problem

malls in Metro Manila, it will answer the following questions:

1. What is the demographic profile of the respondents in terms of the

1.3 Civil Status

1.4 Educational Attainment

1.5 Average Profit (monthly)

1.6 Employment Status

1.8 Years of the existence in the market

2. What are the significant opportunities encountered in operating food

3. What are the significant challenges encountered in operating food cart

4. Based on the findings, what are the key success indicators?

Opportunities and Challenges among Food Cart

I. DEMOGRAPHIC PROFILE OF THE RESPONDENTS

Age: ( ) 19-21 yrs. old ( ) 22-24 yrs. Old

( ) 25 yrs. old and above

Gender: ( ) Female ( ) Male

Civil Status: ( ) Single ( ) Married

Educational Attainment: ( ) Elementary Graduate

( ) High school Graduate

Years of the Existence in the Market:__________________

What particular opportunities and

4. Suitability of the area to the

2. Customer satisfaction in the

product and service

4. Continuity of product demand

6. Product threats (Seasonal

open food cart franchise business?

Good Day! We are graduating students of T.I.P, BSBA major in Marketing

Management. As a requirement of our course, this survey questionnaire forms an

“Opportunities and Challenges among Food Cart Franchise Business”.

confidentiality and will be used for academic purposes only.

THE PROBLEM AND ITS BACKGROUND

popular form of business ownership today. Franchising is a form of

business which the company’s owner or franchisers gives license to

distribute products, services or methods of business to affiliated

dealers, franchisee. In this approach, a franchisor provides the

franchisee with a proven method for operating a business using the

a significant amount of assistance to the franchisee in starting and

managing the business. The franchisee pays a fee or royalty in return.

Typically, a company also requires the franchisee to purchase supplies

In today’s world, food cart industry hailed as today’s top small

business to start in the Philippines. The absence of complex

want to try opening a small business with a low capital.

There are some businessmen and businesswomen who have

thrived and successfully transform their lives through franchising.

we conducted this research about Success Indicators among Food cart

Business to fully know how they able to grow their business.

Background of The Study

In recent years, Philippines is deemed to be the franchising hub

greater revenue prospect, food cart franchising business is thriving in the

suitable on those 5 social classes of people and because most consumers

usually consider snacks as staples, particularly street and fast food.

The food business has dependably increased more ground than

different types of business simply because it addresses to a fundamental

knowledge in starting up a business because you are already riding in an

already successful business system. Everything is set, you must follow

Franchising offers several advantages not only to franchisors but also

to franchisees which helps explain why franchising has been so successful.

Franchisors benefit from these agreements because they allow companies to

workers can cause a company to grow slowly. However, through franchising a