Family business
Franchising in the Philippines : A Guide For Filipino Retirees
Most Filipinos who work abroad as employees put all their time and effort to eight to five type of jobs for many years even for decades we might say, so that they could earn better to support their families and raise the capital they need for that dream business! They remain patient until the time they could finally rejoin their families in their homeland where they could retire and begin the next phase of their lives as even more productive citizens, seniors as they would be called, but not as employees anymore and not only as dependent members of the family, but as business-minded individuals who could contribute to the overall development of the country’s economy with their businesses that could employ a good number of fellow Filipinos.In these days, Filipinos are becoming even more learned about the significance of being business-minded. The opportunity for employment runs out at the age of 60-65, so the other option for retirees who envision active lives which is definitely more lucrative is to have their own businesses. However, the problem is that even though they have the funds to start-up businesses according to their interests, they seem to be hesitant about pursuing it, because of the challenges they might face in shaping their products and services, creating a business name, developing training, operation and production systems, and everything else under the word branding. It all appears to be overwhelming, because of the required attention on the details of doing business. Nevertheless, in franchising, problems that could possibly arise when doing business could be easier solved for senior citizens wanting to do business. Moreover, with the inevitable decrease in capability to deliver laborious and time consuming tasks in conducting one’s own business, the idea of franchising all seems to be very convenient, entirely beneficial and promising, because of its ready made plans, templates, and support system. Moreover, a franchised business is already popular, so if you are able to find the best location for it, you can expect that customers will come to you. If you are an Overseas Filipino Worker (OFW) and dreaming of having your dream business in the Philippines after many years of work, I would suggest that you invest your hard earned money through franchising if you would want to be saved from most of the hassles of creating your own unique business.
There is the Association for Filipino Franchisers Inc. (AFFI) which you may go to and ask for the latest activities and resources pertaining to franchising. The said association encourages Filipino business enthusiasts to patronize local franchises. According to Armando O. Bartolome who is the president of AFFI, ‘franchising is a booming business’. To give you a better idea, Bartolome mentioned about a previous record that stated the income from this industry which amounted to Php54 billion in 2012. In addition, he also said that, ‘Philippines reportedly ranked third among countries that investors are looking at to source potential franchises’. This year, prominent local franchisees are expanding their market reach in other countries. It only means that franchising really is tested to be viable and more importantly, profitable. The success of the franchising industry in the Philippines could be attributed to the fact that our country’s very own franchisees and other international franchisees are incredibly packaged for the newbie entrepreneurs.Depending on your financial capability and interest, there are numerous options to choose from ranging from various industries namely food and beverage (which is very much sought after), travel, convenience stores, pharmaceutical, clothing etc.Food carts cost approximately thirty thousand pesos (Php30, 0000) to even double of this amount. This is very cheap already considering what you would get which are basically what you would initially need when putting it up. You would not have to worry about what to use as equipment and materials, how to train your staff, produce products and where to get your supplies.
You only have to take care of all your operational costs which include rental fees, salaries to employees, electricity and water bill. If you opt for something which is of bigger investment, you can expect to need some Php1.2 million for Mang Inasal, Php30 million pesos for Jollibee, Php35 million for McDonalds, Php5 million to Php8 million for Figaro and Php5 million for Mocha Blends (full store).Considering franchising as your gateway to business is undoubtedly a practical way to succeed in the industry and not put your hard earned money to waste. To retirees, capitalization is at hand, because they could utilize their retirement funds. Aside from wanting to spend it to finance the kind of lifestyles they want when they retire, retirees could use it as investment capital. After all, return of investment and profitability from franchising is realizable.
Consumer Protection Group Hits Protector of Big Businesses
By William Dipasupil
THE economy will fall not because President Aquino is a poor manager but because of some politicians who are protecting the interests of big businesses, according to a consumer protection group. The Movement Against Business Abuses (MBA), an alliance of consumer protection advocates, was reacting to an earlier statement by Sen. Serge Osmeña blaming the President and Energy Secretary Jericho Petilla on the country’s power woes. “If there’s somebody that should be blamed for the country’s problem on electricity, it is Senator Serge Osmeña III, who obviously is protecting the rape of the economy by big businesses,” the group said. Osmeña, they said, has been remiss in his duty as a lawmaker in helping address the country’s problem on thinning power reserves, much more as chairman of the Senate energy committee. “He failed to recommend amendments to EPIRA which is the primary cause of our power problems,” MBA added. Republic Act No.9136 or the Electric Power Industry Reform Act of 2001squarely puts the burden of protecting the interest of consumers and ensuring competitiveness in a deregulated industry on the shoulders of the Energy Regulatory Commission (ERC). The ERC was created to promote and protect long-term consumer interest in terms of quality, reliability and reasonable pricing of a sustainable supply of electricity. The group pointed out that the recent order by the ERC to void spot market prices of electricity generated and sold to Meralco last December and January were clear indications that the government is aware of the real purpose of regulatory functions. The Movement said that it is about time that the real cost or electricity and how it is computed should be made public, which could be done by amending certain provisions of the EPIRA law. As chair of the Senate energy committee, they said, Osmeña may introduce the amendments so that the power generators and distributors would be compelled to make public how they arrived at on the cost of electricity being charged to the consumers. “Investors in the energy sector had for decades held hostage the government and consequently the users of electricity by threats of brownouts every time their greed driven profits are threatened,” the MBA spokesman, lawyer Rey Cardeno, said. Cardeno pointed out that the consumers had always been on the losing end and ended up paying more every time Meralco pushed for another round of power rate increase before the ERC. “We were convinced, then, that the ERC was in the pockets of Meralco,” he said, adding that “unless this is a trick, and ERC and Meralco has perfected several tricks against consumers, we are looking forward to a new directions at the ERC and the Department of Energy.” But now, he said, that the ERC is being true to its functions by ordering a review and recalculate the cost power that Meralco wants to pass on to consumers, the national leadership, including Osmeña, should support the peoples’ demand for transparency on the actual cost of electricity.
Peace in the Family Business
by Enrique Soriano
IN a family business, conflicts arise and it is but natural. Like in any other groups of people, the members of the family have their own perceptions, personalities and ways. These differences create divisiveness and lack of peace in the family business. On the positive note, peace can be made possible if the family members will know what factors determine peace and consider them all the time.
Determinants of Peace in the Family Business
Peace in the family business entails a set of core values, philosophy, common vision and mission, respect, commitment to duty, tolerance, open-mindedness and forgiveness.
Core Values and Philosophy
Peace is the result of good values. Values are rooted first in the family. It makes sense to think that in a family business, peace can be attained. Develop a set of core values which the family adheres to in unity. What do you think are the things that are important to your family in terms of character, ethics, service and professionalism? Are these positive qualities that can better shape the relationship within the family and with everybody else working for the company including non-family members? Come-up with a philosophy that suggests the prevention of problems. Prevention is always better than cure. Incorporate the family values into the philosophy so that it will be the guiding principle of the members of the family in all business dealings. The core values and philosophy of the company will have to remain in the hearts and minds of the members of the family, so that peace can begin intrinsically and be evidently seen in the business environment.
Common Vision and Mission
The peace in the family business can be disrupted when the motivations and objectives of the members of the family are not common. Set the vision and mission of the company, before allowing everyone to do their thing. Never assume that everyone in the family already knows the direction of the company. Conduct an orientation about it especially about why it is so. Always remind about the short-term and long-term goals of the family business. As time passes by, people may tend to forget or may tend to change courses, so it is advisable to mention about the company’s vision and mission when possible, because this is why you are all together in the business. There may be times when some members of the family will debate about things that are not in line with the vision and mission of the company. Such instances can become the source of resentment, when in fact it should not be part of the operations to make the family business successful.
Respect
Respect is giving high regard towards the name and image of the family business including that of its workers and of the dignity of the family. Family members ought to be mindful of their thoughts, words and actions, because it can affect how the public will view the company and the unity of the members in the family. Advise the members of the family, that when in a difficult situation, ask questions to themselves as to whether they are at the right place and time, have already reflected about the ideas they have in mind, have wisely chosen their words, and have certainly decided about what to do.
Honoring the family council, reporting to the assigned authorities, listening to the advice of non-family managers and mediators, and abiding with the rules that delineate the boundaries between family concerns and business matters are opportunities to exhibit respect. Respect results to peaceful interactions. Its practice can be possible when respect is demonstrated and when the members of the family have respectable conduct.
Commitment to Duty
There is peace when the members of the family are committed to their duties, because it lessens the chances of conflicts if expectations are not met when tasks are not completed. When someone fails to be responsible, it is a chain reaction. Someone else will have to suffer the consequences and sacrifice for that failure to deliver. In order to stress on this, develop a family participation plan wherein the roles will be clearly stated and duties completely described including time-frames. Identify the family’s expectations and success indicators of the business.
Conduct regular meetings, because attendance and contribution to these proves one’s commitment to duty. In family business meetings, topics about the governance of the company, objectives, expectations, rights to stocks, profit distribution, training, policies and product/service development among many others can be discussed.
Tolerance
Peace is having tolerance. Allowing the members of the family to have reasonable options and to do what makes them creative and empowered is practicing tolerance. Gain control over the family business by not imposing, but by inspiring the members of the family to prevent and solve problems in their unique and efficient ways. Provide opportunities to be honest and healthily assert one’s thoughts and express feelings and preferences during family business meetings.
Open-mindedness and Forgiveness
Being open-minded gives way to forgiveness. Emphasize on the importance of admitting one’s mistake/s, apologizing and forgiving to maintain harmonious relationships within the family business.
Why Should Family Businesses Diversify?
By Enrique Soriano
OVER a long period of time, the literature on corporate diversification has focused almost exclusively on large, publicly held firms. However, within the last few years, there have been some works published , dealing with diversification issues in small and medium sized firms but also in family businesses (Iacobucci & Rosa, 2005). Whereas some authors hold the view that family businesses engage in significantly less diversification than non-family firms, others describe diversification as a prevalent long-term strategy among family businesses.
Following Guillen (2005) and Granovetter (1995), we define a business group as a collection of legally independent firms that are connected by economic links (such as ownership, financial, and commercial) and social ties (such as family, kinship, and friendship) that lead to operational links. This definition distinguishes conglomerates or strategic alliances from buyer groups, in that the latter operate under somewhat unified entrepreneurial guidance, going beyond simple alliances among otherwise independent firms (Yiu, Bruton and Lu. 2005). In our case, the main social tie that links different firms into a business group will be that all those firms are under the control of the same family. The family business group (FBG), is the group of firms under control or managed by a group of people with family ties.
The usual criteria defining family firms, from the management side point of view, is that the institutional values of the firm should be identified with the family. Empirically this implies the involvement of multiple generations in a business group, the ownership of the group and voting control by family members, the effective management of the firm by family members and a large number of family members having board seats.
Examples of big family business groups in the Philippines are the Ayala Group, the Lopez Group, and the Gokongwei Group. Some of the most enduring family businesses started in one industry before growing into diversified companies with many lines of businesses.
Diversification is entering new markets with new products. Sometimes you just need to bust out and try something new like if you’re a tobacco firm, buying a packaged-food company; a cola firm entering the water business; or a chemical company going into the spa supply business.
Many companies appreciate the need to diversify but few use it as a way of relating to their markets. Fundamentally, this strategy is about creating new products with new product life cycles and making the existing ones obsolete. By doing so, firms launch new products that are developed not just for current customers but for new ones, too. To execute this strategy, you usually manage a merger, an acquisition, or a completely new business venture.
Well-known, highly innovative companies which include Intel, Google, DuPont, and all the pharmaceutical companies are into diversification. A company’s diversification strategy can be either related or unrelated to its original business. Related diversification makes more sense than unrelated because the company shares assets, skills, or capabilities. But many successful companies, such as Tyco and GE, continue to buy unrelated businesses.
We may distinguish among related and unrelated diversification, which in turn can be seen as a continuum in between single business units and fully diversified firms. Related diversification means entering in multiple industries that are able to share a common pool of corporate resources and capabilities. These are businesses where sales force, advertising, and distribution activities can be shared, exploiting closely related technologies.
We may safely assume that the family is directly involved in decisions regarding corporate diversification (in contrast with publicly held firms, where managers make these choices). Hence, to concentrate on FBG can be a useful way to analyse if diversification may be a valuable strategy for creating value.
To a family business, diversification is a way to extend their capabilities into new lines of business. The diversification will turn out profitable if the capabilities than were useful into one line of business are indeed also a capability in the new segment.
Diversification, on the other hand, may have two main costs for family business groups:
(i) The need of adding capabilities outside those of the family, be it through the hiring of professional managers, or through partnerships with other shareholders that incorporate the needed new abilities. (ii) An increase in complexity in the family group that may affect negatively its organization. In any case, the incorporation of outsiders to the FBG reduces the firm’s control by the family and may require an increase in monitoring effort.
Why Diversification Matters
Anyone who has invested money has heard about the importance of diversification in a portfolio to hedge against losing too much money when markets retreat. Diversification can be equally important to businesses that may face serious threats during turbulent economic times or when disruptive technologies enter the marketplace and big competitors move in. Although family businesses are known for their nimbleness and ability to react quickly to changing times, diversifying lines of business and expanding products and services can offer additional security when times get tough.
The Third Stage of Family Business
by Prof. Enrique Soriano
THE cousin consortium is the third stage of a family business. After having the ownership placed under sibling partnership from the founding stage, the next generation, comprised of the cousins, would then acquire the family business’ stakes as owners and managers. At this point, there would be several families involved (unlike the previous stages when there was only one family) which could be a challenge in arriving at a common vision and in immediately deciding about business and even familial matters. Fortunately, family businesses that are able to stand for many long years — from one generation to another — experience difficulties in many areas. However these family businesses have found that institutionalized governance is the key to success despite conflicting interests.
One positive factor that puts the cousin consortium at an advantage is that the cousins would have better outlook on familial and business disputes. In the past, they have witnessed how their parents and/or grandparents fought over differing ideas and have felt the unsettling negative impact of unwise decisions. There could be a growing hope among the cousins to learn from the mistakes made during the founding and sibling partnership stages of the family business and make better choices.
On the other hand, even if cousins already possess a better understanding of situations, it would still be hard to always share the same vision. Since, there would be a number of families concerned, attaining unity could not be secured at all times. There is a tendency for the cousins to treat situations from the point of view of their own immediate families. One would argue, “Our family started the importation of our products, so we sure have to be the ones to decide on whether or not our company should expand on it”. Regardless of the business context, when the concept of the family would be inserted into the argument, divisiveness would start to emerge. This is why the support from non-family business experts and even family business psychologists would be highly recommended in this stage of the family business. The neutral advice of these people that come from a scientific approach could provide the cousins with the needed guidance to set aside their biases and become proactive.
In a cousin consortium, the depth of involvement of each of the cousins vary. There are those who would be active in the business and there are those who would be passive. The scope of ownership could also be different. Some of the cousins could be majority stockholders and some could be minority stockholders. In this case, the control over the business would not actually be equally balanced. There would be procedures that need to be considered. The non-family members who would serve as board of directors would have to ensure that the objectives of the enterprise would be prioritized.
It is of course very healthy to develop an open communication among the cousins; after all they are one huge family. Any type of organization would benefit from it. However, since they would not be coming from one and the same nuclear family, it would not necessarily follow that they would have the same ideas, background, culture, practices, beliefs, education, skills, levels of understanding and experience. Moreover, they could be living from any part in the world that could add on the difficulty of gathering all at once for a meeting (something which could easily be managed in a smaller group of family like that of the founding stage to sibling partnership). Nevertheless, all these hindrances in achieving an open communication among the cousins could be managed if they would specifically begin the consortium out of willingness to participate, commitment and respect to each other.
What could save the family business that is under a cousin consortium would be to strongly implement an institutionalized governance. The cousins would need to agree to stick with what really matters for the upkeep of the family business and for the maintenance of peace across the several nuclear families concerned. They would need to take the initiative to participate and be informed. The cousins would need to establish a strong leadership powered by their teamwork and their shared vision and mission for the family business to flourish in their time and in the coming generations.
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How Can A Family Business Prepare for the Hard Times?
by: Prof Enrique Soriano
MANY would say (and they have a point) that initially, family members are only active in family businesses, because of the obvious reasons like being able to receive extraordinary financial gains (which they could never receive from other companies), better treatment by the administration, and the opportunity to select their preferred line of duty and their freedom to maintain a particular lifestyle. These are all undeniably true in most cases, but nonetheless, family businesses remain standing, because the family members eventually learn the value of teamwork amongst themselves.
In order to prepare the family members to develop solutions in salvaging the family business, it is always helpful to be honest with everybody’s needs and opinions. A dialogue wherein every single family member will have the chance to voice out his/her needs and thoughts about the company’s situation and other specific issues that need to be addressed could be a healthy practice. Stressing the guidelines beforehand and doing consistent reminders are ways to preventing these from happening. #OpinYon #business
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