Most of the people who have no experience in business wanted to get into

franchising in the Philippines, mainly because it gives freedom and opportunity to invest

money without much effort of researching of target market of the business. But contrary

to what most people think, your budget should not be the main gauge in choosing a

franchise business. Of course, it should be a part of your selection criteria but it should

not be the primary deciding factor. Instead, what you need to do is take a closer look at

yourself. Know where your passion lies. Just follow your heart and it is almost

guaranteed that your franchise business will be a huge success. Consider the brand, the

business model and the support package being offered.

Choosing the brand, when you go into a franchise agreement, you are buying the

name of your chosen product or service. You are banking on it to get an early lead over

your competitors. So choose wisely.

Consider the business model. See if your chosen franchise business has a well

established business system. Does it conduct its business effectively? If you see that the

number of its franchise outlets is significantly increasing, then it means that business is

good and it’s probably worth it.

Are there any available support? One good thing about franchise agreements is

that the franchisor offers support and guidance to each of its individual franchises before

and during operation. It’s really a part of the package – and a vital one, too! Quality

control, continuous research and development, and trainings should also be included in

the overall package. You also need to check the legitimacy of the franchise. Head off to

the DTI office nearest you and see if your chosen franchise is registered and not some

“fly-by-night” operation. You also ask if the franchise is affiliated with any existing

2
legitimate franchise groups such as the Association of Filipino Franchisers, Inc. (AFFI),

Filipino International Franchise Association or the Philippine Franchise Association.

Remember, it’s always better to be safe than sorry. (JIp 2009)

Background of the study

Franchising is often defined as being in business for you but not by you. It is route

to expansion where there is a franchisor and a franchisee that enters into a franchisee

agreement, although both parties have a contractual relationship, one that enhances and

sustains the success of franchising. It gives the business a distinct ability to expand and

grow through the commitment and resources of entrepreneurs who have a stake in the

business. Their commitment to the business is more than any manager or employee who

gets paid their salaries regardless of sales and costs. The franchisee is precisely concerned

with these because his profit and returns depend on them. Franchising is the fastest

growing way of doing business. It has become the most important and popular method of

creating business. It has now become a phenomenon worldwide.

According to the Philippines Franchise Association(2009), franchising is

duplicating the success of your own business through the proven franchising formula.

The Philippine Franchise Association (PFA) was founded in 1995 and is the pioneer and

biggest franchise association in the Philippines. It is the voluntary self-

regulating governing body for franchising in the country with 180 franchisors and allied

members nationwide. PFA members are bound by the Fair Franchising Standards (FFS).

By adhering to this code of ethics, PFA members commit themselves to respect and to

apply fair set of provisions in the conduct of the sale of their franchises.

3
 PFA pioneered and undertook numerous programs which saw a large growth in

franchising in the country resulting in:

 The growth of the sector, from only 50 franchises in the early 90s to about 1000

in 2009.

 The creation of thousands of enterprises and generation of hundreds of thousands

of jobs, making franchising an important tool in the country’s economic growth.

The entry into the international market of Filipino brands and concepts.

 The fostering of an environment of excellence through the Franchise Excellence

Awards (FEA), which help equip franchises to be more globally competitive.

 The development of the Fair Franchising Standards, which ensures just and

mutually beneficial business dealings between franchisor and franchisee.

 The growth of the Philippines as the “franchise hub of Asia” when it comes to the

development of franchise concepts.

These and other achievements have made franchising the preferred business

method for more and more entrepreneurs – both aspiring and established.(Philippine

Franchise Association, 2009)

Food cart franchising business in the Philippines is one of the most popular

businesses today. A lot of entrepreneurs today go into the food cart business despite of

the possible problem they might encounter, first, because it's cheaper compare to the

other type of business, and second it’s easier to put up than restaurants. In fact, even big

fast-food chains are using food carts for their events or promotions. Another reason is

that depending on the target market and marketing strategy, you can make a food cart

4
either mobile or stationary. We can see that there are a lot of food cart businesses today

grow rapidly in Lucena City, especially at those area that is near in Schools, Xerox

machines, Establishments, Market and also in Malls.

Like in the SM Lucena City most of the businesses are more into food and there

are almost 246,392 people. It gives an opportunity to a lot of entrepreneurs to put up a

food cart businesses in this area. This thesis focuses also the role of the franchisor and

franchisee. (These two persons represent the two levels of people involved in franchising)

We have on the first level the franchisor who lends his trademark or a trade name and a

business system. And on the second level the franchisee who pays a royalty and often an

initial fee for the right to do the business under the franchisor’s name and system. More

particularly, I want to examine what are those problems they most often encountered in a

food cart franchising business, and reason why a lot of entrepreneurs are growing despite

of the risk in franchising.

Statement of the Problem

The main purpose of the study is to assess the problems encountered by the

selected food cart franchising business in the area of SM Lucena City. Specifically, it

sought to answer the following problems:

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

variables?

1.1 Age

1.2 Gender

1.3 Civil status

1.4 Educational attainment

5
2. How much is the usual needed capital to franchise a food cart business?

3. What is the usual average profit of food cart business monthly?

4. How does the respondents rate the problems encountered by the selected food cart

franchising business at SM Lucena City.

4.1 Internal environment

a) Franchising / Royalty Fee

b) Return of Income
c) Profitability
d) Suitability of the area to the target market
e) Product spoilage

4.2 External environment

a) Government support/promotion
b) Threats on informal/unregistered and small scale food cart businesses.
c) Customer satisfaction in the product and service
d) Increasing of competitors
e) Continuity of product demand
f) Product trend (seasonal product)

5. What alternatives course of action is necessary to address the problems encountered as

perceived by the respondents?

a) Study first the location before putting up the business

b) Implement alternative ways to promote the product
c) Controlling the product to avoid spoilage
d) Attend franchising seminar

6
Conceptual Framework

The Conceptual Framework on Figure 1 presents the 2 core variables of the

study, these are the problems encountered as perceived by the respondents composed of

internal and external environment and the profile of the respondents composed of age,

gender, civil status, educational attainment, capitalization, and average profit .

The Conceptual Framework also shows the relationship of alternative course of

action necessary to address the problems encountered as perceived by the respondents

shown by a bracket.

Figure 1. Conceptual Framework on the Problems encountered as perceived by the

respondents

Internal environment
Profile of the
respondents  Franchising /
 age Royalty Fee
 gender  Return of
 civil status, Income
 educational  Profitability
attainment,  Suitability of the
 capitalization, area to the target
 average profit market
 Product spoilage

Alternative course of action necessary to

External environment address the problems encountered as
 Government perceived by the respondents.
Problems support/promotion
encountered  Threats on  Study first the location before
informal/unregistere putting up the business
as perceived d and small scale  Implement alternative ways to
food cart businesses. promote the product
by the
 Customer  Controlling the product to avoid
respondents satisfaction in the spoilage
product and service  Attend franchising seminar
 Increasing of
competitors
 Continuity of
product demand
 Product trend
(seasonal product)
7
Significance of the Study

The study aimed to give an idea and information about the food cart franchising

business and Problems encountered by the selected food cart franchising business in SM,

Lucena City.

This study will help and give importance to the ff:

To franchisor. This study could serve as a useful for other franchisors desiring to

expand their food cart franchising business.

To franchisee. This will helps them to study those problems they encountered

despite of their success and why they are continue in operating this business.

To potential franchisees. It will help them to decide as to which product they

would need to acquire for their food cart franchising business. Giving new studies for

some who are interested in venturing food cart franchising business.

Scope and Limitation

This research study discussed primarily the problem encountered in by the

selected food cart franchising business in the area of SM, Lucena City. This study will

also discuss the role, advantages and disadvantages of food cart franchising business.

Lastly, this research study was limited only to those who are engaged in food cart

franchising business and to those who are willing to acquire food cart franchising as their

own business.

Definition of terms

Franchise. A franchise is an agency arrangement in which the seller (or the franchisor)

grants the buyer (Franchisee) exclusive rights to market the seller’s product; in return, the

buyers agrees to follow policies desired by the seller .

8
Franchising. It is a business model wherein the owner of the business (franchisor) gives

the independent operator (franchisee) the right to distribute his products, implement his

business techniques and use his brand and/or trademark in exchange for a fixed franchise

fee and a portion of the gross income (royalty fee, advertising fee, etc.).

Franchisor. It refers to the one who lends his trademark or a trade name and a business

system. Owns the overall rights and trademarks of the company and allows its franchisees

to use these rights and trademarks to do business.

Franchisee. It is the party in a franchising agreement that is purchasing the right to use a

business's trademarks, associated brands and other proprietary knowledge in order to

open a branch. And one who pays a royalty and often an initial fee for the right to do the

business under the franchisor’s name and system.

Food cart. It is a mobile kitchen that is set up on the street to facilitate the sale and

marketing. Food carts are often found in large cities throughout the world and can be

found selling food of just about any variety.

Place. It is an area with definite or indefinite boundaries; a portion of space. The

particular portion of space occupied by or allocated to a person or thing.

Price. It is the quantity of payment or compensation given by one party to another in

return for goods or services. Price can sometimes alternatively refer to the quantity of

payment requested by a seller of goods or services, rather than the eventual payment

amount.

The Philippine Franchise Association (PFA). This is pioneer and biggest franchise

association in the Philippines. It is the voluntary self-regulating governing body for

franchising in the country with 180 franchisors and allied members nationwide.

9
10