ARMAMENTO MAURICE BSENTREP 2 - A

1. History of franchising.

The word Franchise comes from the Old French meaning freedom or privilege. In the middle ages of Europe, the local
lord would grant rights to hold markets or fairs. In essence, the monarch gave someone the right for a certain type of
activity. They were the first Franchisors – and did not know it.

In 1851, Isaac Singer accepted fees from independent salesmen to acquire territorial rights to sell his recently
invented sewing Machine. The Singer Company began granting distribution franchises and was the first Company to
write franchise contracts.

In the late 1880s Cities began giving franchises to newly established electricity companies. Around the turn of the
Century, oil companies and automobile manufacturers began to grant rights to sell their new inventions

2. What is the history of franchising in The Philippines and why franchising relevant in The Philippines.

The history of franchising in the Philippines can be traced back to the 1970s, gaining significant momentum in the
1980s.

Entrepreneurial Culture: The Philippines has a strong entrepreneurial culture, with many individuals aspiring to own
their businesses. Franchising provides a structured and proven business model, making it an attractive option for
those looking to start their entrepreneurial journey.

Economic Stability: The relative economic stability in the Philippines has led to increased consumer spending.
Franchising capitalizes on this by providing accessible business opportunities across various industries, catering to
the demands of a growing middle class.

3. Describe factors responsible for growth of the franchising in The Philippines.

Adaptability of Franchise Models: Franchising offers flexibility and adaptability to various industries and business
models. This versatility has allowed franchising to thrive in different sectors, accommodating the diverse interests and
skills of potential franchisees.

Overseas Filipino Workers (OFWs): The large population of overseas Filipino workers, upon returning home, often
seeks business opportunities. Franchising offers a ready-made business with the support of a recognized brand,
making it an appealing option for returning OFWs looking to invest in their homeland.

Global Brands' Interest: The Philippines has become an attractive market for international brands looking to expand
globally through franchising. The entry of well-known global brands has further fueled interest and growth in the local
franchise industry.

4. How did Benjamin Franklin became the father of franchising?

The modern concept of franchising emerged in the 19th and 20th centuries, particularly with the expansion of
industries like fast food and retail. The title of the "father of franchising" is often associated with individuals like Isaac
Singer, who founded the Singer Sewing Machine Company and is credited with one of the earliest examples of a
franchise system in the mid-19th century.

Benjamin Franklin, however, made significant contributions to various fields, including science, writing, and diplomacy,
but his legacy is not specifically tied to the development of the franchising business model. It's important to attribute
the growth of franchising to entrepreneurs and business leaders in the appropriate historical context.

5. Describe the different types of franchising format.

Job Franchise is generally a low-investment franchise (often home-based) that can be operated alone or with
minimal staffing (less than 5). The franchisee is only required to pay a franchise fee and minimal startup costs, like
equipment, basic materials, and sometimes a vehicle. A large number of industries can be franchised in this manner,
generally providing services.
Product Franchise - Sometimes called a Distribution Franchise, these product-driven franchises are where the
franchisee distributes the parent company products and some related services. The parent company provides the use
of its branded trademark, but not typically an entire system for running a business. Product franchises are
predominantly large product dealers. Consequently, product, or distribution, franchising makes up the highest
percentage of total US retail sales.
Business format franchising is the most popular of all the types of franchising, and is what most people think about
when talking about the franchising industry. This is likely why a common objection to franchising is, “I don’t want to
work in fast food.” A franchisee under the business format operates his or her business under the parent company’s
brand, plus gets the entire proven system under which to operate and market the products or services.

Investment franchise is usually a large-scale business that requires a huge capital investment (huge compared to
other franchising options). The franchisee is actually a major investor who provides the money and management
team, or sometimes engages their own franchisee, to operate the business. This type of franchising is used primarily
to produce a return on investment with little personal involvement, as well as a possible capital gain on exit.

Conversion Franchise - It is a method of growing franchise systems wherein a franchise enters into a relationship
with an existing company and converts it into a franchise unit. The franchisee adopts the parent company’s
trademarks, marketing and advertising programs, training system, and client service protocols.

6. Differentiate between product/trademark format and business format franchising. Give an example of
each format.

In a product/trademark format franchise, the franchisor grants the franchisee the right to sell its products, but the
franchisee does not use the franchisor's business model, trade name, or overall brand identity. Essentially, the focus
is on the product itself rather than the complete business concept. This type of franchising is common in industries
where the product is the primary focus, and the franchisor is less concerned with how the business is operated.

Example:
A manufacturer of specialty sauces may offer product format franchising to individuals or businesses that want to sell
their sauces. The franchisees can use the manufacturer's established recipes, branding, and products but are not
required to follow a specific business model or operational guidelines.

In contrast, business format franchising is more comprehensive. In this model, the franchisor not only grants the right
to sell its products but also provides the franchisee with the entire business model, including trademarks, trade names,
operational systems, marketing strategies, and ongoing support. The franchisee is expected to follow the franchisor's
established methods to maintain consistency across all locations.

Example:
McDonald's is a classic example of business format franchising. Franchisees not only sell McDonald's products but
also operate under the McDonald's brand, follow its standardized procedures for preparing and serving food, use its
marketing strategies, and receive ongoing support and training from the franchisor to ensure consistency across the
entire franchise system.