December 2007 Archives

Photos from Agence France-Presse. (I have not been able to access this blog for the last four days, so I’m posting my entry for last Friday.) For the last, oh, 5 to 6 years, franchising has continued to fizzle and sizzle in the Philippines, cornering an ever growing share of retail sales especially in Metro Manila. A recent article by Tina Arceo-Dumlao of the Philippine Daily Inquirer that there are now “close to 900 franchises operating in the country from just 50 in 1995 and 64 percent of these are homegrown. These are largely in food, service and retail.” Interestingly enough, many new franchise owners are 30-something and below, says the Philippine Franchise Association. They know the pulse of the market because they ARE a big segment of the “upwardly mobile professional” market. They are aggressive, looking not just at the Philippine market but ASEAN and beyond. They have nimble business sense and they readily morph and adapt their business strategies to suit the market -- something that older, more traditional businessmen might have difficulty doing. “Franchising is definitely a growing market,” Bartolome says. “Every month, there are entrepreneurs starting to expand via franchising. More and more Philippine companies that are franchising here are now inspired to expand beyond the shores like within the ASEAN region, Middle East and North America. I could see that within the next decade, almost all businesses will be into franchising,” says Amando Bartolome, a franchise consultant. You don’t need to be a rocket scientist to see why franchising is growing exponentially. Success rates through franchising are higher because it’s easier to make more money in a business that has already been tried and tested. If you are considering starting a business the franchising way, there are many online resources that can help you weigh the pros and cons. Follow these links: The Philippine Franchise Association’s Frequently Asked Questions is a good resource for potential franchisees. Pay close attention to the things that you need to know before you get any franchise. It’s hard to get out of it once you start and it can be a very costly mistake. MagNegosyo blog’s Franchising 101 gives an overview on what you need to do to choose the right franchise for you. One of its articles says the recovery period can range from six months to three years. Philippine Franchise Business Investment has some articles both for those looking for a franchise and those who wish to franchise their existing businesses. One of its articles says that not all well-known brands are expensive to franchise and some are priced just right for the start-up entrepreneur. This insight is particularly useful:

“There are some cheap franchises being advertised that can be had for as little as 5,000 php. Even if it’s relatively cheap to begin with, many sound suspiciously like fly by night companies. Carefully research them first and try to get feedback from previous clients before committing any money. Most of these franchises lack name recognition to warrant paying a franchise fee. There are some food kiosk who are not really well know brands are offering their franchise for an amount not in proportion to their value. In these cases, starting from scratch would be a better idea than paying for a franchise that will go nowhere.

You also need to be well-versed in legal issues surrounding franchising. Philippines Franchise Information blog’s guest post from a lawyer says a good due diligence involves investigating the day-to-day operations of the franchise. Through the years I have been writing about entrepreneurs, the best tip I have heard is to visit an existing franchisee and asking him about the business. That interview will tell you many things that the franchise contract won’t. Now, if the franchisor refuses to give you a list of all his existing franchisees, that’s a sure sign something is fishy. Like most decisions, almost every successful franchise owner says getting into franchising requires that you know yourself first. It doesn’t work for everybody, most especially for people who cannot handle being their own boss. Once you know it’s for you, you need to know which franchise fits well with your passion and interest. From there, it’s pure hard work and, hopefully, financial and psychological satisfaction. Good luck!

My sister is an OFW. Right now, she is here in the country on a five-month vacation and using the break from work to become a licensed real estate agent. When she goes back to work in January, she is hoping to sell properties to her fellow OFWs. Not a day wasted for our hard-working workers based abroad. Many entrepreneur nowadays is in deep thought on how to market to OFWs. A Philippine Daily Inquirer special report shows that this Christmas season alone, dollar remittances have fueled new affluence among Filipinos. (Click here to read X'mas spending evolving toward 'more important' purchases and here for Dollar remittances fuel new affluence among Filipinos). How do you market to someone you cannot see, you cannot visit, you cannot call through your landline? That’s definitely a challenge, but finding the solution will definitely bring in exciting results. The real estate industry has already done this. It is raking in the money and from the looks of it, despite the subprime mortgage issue, will continue to do so in 2008. Most OFWs are not yet well-versed on various investment options in the market so houses and real properties are good options that are tangible and easy to understand. But that’s not to say other industries have not benefited. Malls like SM have observed that even high-end shops have reported increased sales. Since Filipinos cannot finish a shopping day without eating at a restaurant or fast food place, the food business is also steeped in OFW money. The tourism industry is trying hard to get a corner of the market, but things are a little bit more difficult for them. Perhaps in the coming year when most have already bought their iPods and flat-screen televisions, people will be starting to crave for travel and vacations. Apart from these industries, other businesses that need to think about getting a slice of the OFW market are banks (remittances), IT companies (whether as suppliers of banks or those dealing in gadgets like laptops etc), media organizations, financial services, investment professionals, courier services, travel and tours, services industries, education and others. Sometimes, all it takes is a little creativity, packaging, and foresight. OFWs have been taken for granted long enough. It’s time people consider them as a formidable market.

  Four powerful businesswomen report big successes in 2007 – and are not afraid of what 2008 will bring. An excerpt of the article from Philippine Daily Inquirer below: Tessie Sy (SM Group) Retail, banking, property development

“We are confident that the Philippine economy has sufficient momentum to cope with the external challenges facing it such as the weakness in the US and European markets and higher inflation due to the unrelenting increase in crude oil prices. On that note, we decided to pursue our expansion plans across all our core businesses. Both our retail and mall businesses will be expanding outside of Metro Manila, while the banks will complete their consolidation of recent acquisitions. The property group will launch new residential projects, and perhaps break ground for the sports arena and the Radisson hotel which will both be at the Mall of Asia complex. We will continue to sell condo units and beach and country club shares in Pico de Loro. All these will cost the whole group about P26 billion in capital expenditures.”

Dr. Vicki Belo (Belo Medical Group) Beauty business

Belo Medical Group is definitely on track in its growth plans for 2008. Actually our growth plan covers a five-year strategic program starting in 2007 up to 2012. The game plan is to calibrate BMG and prepare the organization to embrace unprecedented growth in the global medical tourism picture.

Joji Ilagan-Bian (Tumble Tot) Educational institutions, business process outsourcing

I believe that 2008 will be a year full of positive challenges—positive because I think there may be greater concerns to hurdle—but once we will be able to address these “positive problems,” business will be better. The outlook for small and medium sized businesses (like what I have) is bright—there will be more markets for us. One of the challenges is also to look beyond the Mindanao borders as a good market for products and services; be more flexible and creative in doing business, which we can easily do because of our size.

Vicki Jardiolin (Natasha and Confetti) Direct selling and retail

Natasha [a direct selling company] had growth of about 20 percent. We started and intend to expand the Natasha Mall—a section in our catalogue where established brands such as Bobson, Bossini, Confetti, Dickies, Hanford, Nafnaf and Oshkosh display their selected products as in a real mall. Expansion of kids’ line are also planned. Expecting OFW remittances to increase purchases of apparel and personal care items though a strong peso is a cause for concern. This may dampen spending somewhat especially after the holiday spending.

Read the article here.

What’s the best way to find out how to nail that loan that you need to expand your business or develop your product? Ask the bank of course! BPI Foundation, which is turning 30 next year, helps small to medium-scale enterprises through seminars and mentoring sessions on how to get loan applications approved. Banking is, after all, a business. Banks can’t just lend to you because they want to help. The loan officer you will be talking to will have to justify their decision to lend money to you. What does he have to show for his decision? He will need your books, your cash flow statements, your business plans, your business projections, and your product designs. In short, documents that not a lot of you small businesses have at the tip of your fingers. It doesn’t have to feel like crossing EDSA in the middle of the night without the help of the pink overpass, BPI Foundation is saying. A program called “Show Me, Teach Me” has BPI Family Savings Bank employees reaching out to communities near their branches to teach them such things as basic accounting. This project is also in partnership with the Department of Trade and Industry. I checked with the BPI Foundation office here in Manila if this is done on a scale that can make a real difference. I am all too aware that this can look good in an annual report, but not much on the ground. Officials said they themselves go down to ground level and teach accounting in Filipino. It makes sense at the business level because this activity also helps the branches find small entrepreneurs that can turn into big depositors in the long-term. How I wish, however, that BPI Foundation has a list of contact persons in the provinces on their website so that people can look them up and find out how to join these seminars. The Internet nowadays is a great resource, and you don’t need to be a rocket scientist to come up with ways to use it more effectively! Sigh. So those interested will have to make do with their Contact Us website. Here is the link: http://www.ayalasocialinitiatives.com/getinvolved.asp. If you think you need this kind of help, join those seminars. After all, they’re free. Oh, and another interesting tidbit. BPI Foundation has announced that it is developing a trainor’s kit that will help families of overseas Filipino workers cope with the escalating social cost of migration, gain financial literacy, and engage in entrepreneurial endeavors. The trainor’s kit is in partnership with the non-profit Atikha Overseas Workers and Communities Initiatives, Inc. This kit will be unveiled during its 30th anniversary celebration next year. Read more about BPI Foundation in this article and in this website.

The Philippine Daily Inquirer's Business Monday Executive Forum asked several business owners some tough questions: How did your business fare in 2007, how much did you grow, what were your projects and what are your expectations for 2008. Normal fare for end-of-the-year assessments and business planning for big businesses. (Read the article here.) But if you're a mom and pop outfit -- maybe you have a small pig farm or a simple gift shop -- it's easy to slip and slide from year to year with no "assessment" or "planning" at all. You have no stockholders to report to, nor a board of directors to check your progress. However, a simple assessment and planning session perhaps even by yourself or a few friends can clarify issues in your head or crystallize a plan that has been forming while driving. It helps if you know how to extract the information you need to make a good assessment and how to analyze your own books. I find the articles in the Go Negosyo website to be useful even for those who have no idea what a financial statement is. Most of them were written by SME Insight writers, so no wonder. Click on this link to go to their download section. The food, beverage, media and healthcare industries all seemed to have a fruitful and eventful year in 2007. All three businessmen from Figaro Coffee, GMA Network and Whealth Inc. see another good year in 2008. What about you? How did your business do?

What's waste for many can be gold for others. Farmers from Northern Samar and Bicol are learning how to turn the lowly coconut husk into a major source of income, with the help of non-government organizations in the area. Veronica F. Villavicencio of the Peace and Equity Foundation explains how Filipinos can make money from coconut husks. Watch this video that I took during a recent Good News Kapihan press conference.
Online Videos by Veoh.com

In case you don’t know this yet, state-owned Development Bank of the Philippines (DBP) is offering forward foreign exchange rate protection under its hedging facility for exporters. This is quite helpful of DBP president & chief executive officer Reynaldo G. David. At least, here is something concrete that affected sectors can do to mitigate the impact of the peso appreciation. As of last week, handicraft manufacturers, aquaculture traders, those who are in the carageenan and garments businesses who sell to the United States, Europe, Japan, Chile and India are some of those who first applied for the facility. How does it work? Exporters enter into a forward contract with the DBP where they will specify a particular exchange rate for a particular period, say, one month from now, or three months from now. Only the net difference between the agreed dollar/peso forward rate and the market rate shall be settled at maturity. I saw similar schemes during the currency crisis of 1997 for exporters, at that time to protect them from peso depreciation. DBP says there are no charges to be paid for the scheme. It also has a foreign exchange insurance product that protects the exporter just in case the peso suddenly depreciates. Under the second product, DBP will allow exporters to sell their dollars to DBP at a specified price on a specified date. “Thus, in the event of peso depreciation, the exporter can sell his dollars at a higher rate on maturity date. If the peso appreciates, the exporter will be able to sell at the agreed protection rate to protect him from any loss,” David says. Notional amount for both programs is at a minimum of $10,000, with terms ranging from one to three months for FX insurance, and one to twelve months for forward FX rate protection. DBP and the exporter will determine the forward rate, which will be calculated based on the interest rates of the peso and the dollar, the amount, and the tenor of FX cover. I am still waiting for the DBP to come back to me with their latest figures on the take-up of this facility among exporters. Stay tuned!

The World Bank believes it has the answers. The Philippine Daily Inquirer's banner story today shows a list of measures the International Finance Corp., the private sector development arm of the World Bank, is urging the government to adopt. Do you agree with the IFC? It says the Philippines is weak especially in the areas of starting a business, property registration and ability to access credit. In a nutshell, IFC suggests that the government should:

enhance the government portal for business registration to include, among others, the health and insurance of employees

remove minimum capital requirements for setting up a business

reducing procedures to register properties, such as by eliminating the notarization requirements or allowing the registrar to notarize deeds

pass a law to establish a credit information bureau that will guard the payment history of potential borrowers

allow borrowers to inspect the business background of lenders

The proposal on the credit information bureau is particularly interesting because at the moment, lenders are keeping their own counsel on who is creditworthy or not. Why would they share that kind of information with their peers, no matter what they say publicly about "working together for the good of the industry." The absence of a good database on potential borrowers makes it easier or bad borrowers to get a loan and raises banks' past due loans. Who is the end loser here? The banks to a certain extent because their image gets hurt, but more so good borrowers who get higher interest rates and a longer time to process loans because of more documentary requirements and credit history checking. At least, that's how bankers explain the situation. Unfortunately, getting that reform done will depend on Congress, where the road to an important bill can twist and turn like a supertyphoon dancing with another supertyphoon.