FRANCHISING

RED FLAGS
PRESENTED BY: PROF. JOHN ALFRED A.
MENDIVEL,MBA
THESE SCENARIOS VIOLATE SOME OF
THE BASIC PRINCIPLES OF
FRANCHISING, ADHERENCE TO
WHICH SPELLS SUCCESS.
• Absence of a brand or
trademark
Franchise fees are paid for using the
trademark that has been used in the
market for at least one year. The longer
it has been used, the better. Be wary of
a franchise offering where the
trademark had recently been used or
not used at all.
• Ambiguous Company
Franchise applicants should ascertain that
franchise companies are registered and
legitimate. Legitimacy implies that their
trademarks are registered with the
intellectual property office and that
companies are certified by the securities and
exchange commission and the department of
trade and industry.
Avoid companies offering franchises that do
not introduce one to the franchisor and do
not give one the opportunity to visit the
franchisors office.
• Franchisors without company – owned
branches
Franchising occurs when a proven business
system can be used. This system is developed in
company-owned branches. It’s important to check
if the franchisor owns branches. The ability to
require compliance with procedures is greater
when the franchisor has his own branches that
implement them.
• Inability to show list of
franchisees.
Responsible franchisors are open to the
applicants talking to their franchisees during
the application process. When franchisor
does not give the list of franchisees, one can
deduce that the franchisor wants something
to remain hidden from the applicants.
• Manipulative marketing gimmicks
Responsible franchisors veer away from hard
sell and manipulative marketing gimmicks. Be
wary of marketing gimmicks such as buy one
take one, promotional franchise fees, lifetime
rights, absolutely no royalties, and 10, 000
peso franchise investments.
These are marketing come – ons designed to
simply sell.
• Signing of franchise agreement
Signing the franchise agreement comes at the
later part of the qualification process. One must
avoid companies that will make signing the
agreement and paying fees their first agenda.
It’s also crucial that franchise applicants be
given the opportunity to read and understand
the franchise agreement. It would be grossly
unfair of applicants are not given a copy and the
chance to study the franchise agreement before
signing it.
• Unrealistic promises
Listen carefully to the way the franchise
offering is presented. Some will make
promises that border on fantasy like 100
percent guaranteed success or that
guarantee payback to franchisees in two or
three months.
• Vague qualification process
Franchise system explain clearly to
franchise applicants their qualification
process. Doing so facilities their
understanding and acceptance of the
process and manages their expectations.

When the process is not explained,

applicants risk changes at the whim of the
franchisor, which at times become
unreasonable and unrealistic.