CHAPTER I

PROBLEM AND ITS BACKGROUND

This chapter included the introduction, statement of the problem, conceptual

framework, significance of the study, scope limitation, location of the study and the

definition of terms used.

Introduction

Many Businessmen are now using franchising to make their business grow

because it’s the easiest and most cost effective to start-up an entrepreneur. Franchising

is an ideal business opportunity that facilitates sharing of best practices, processes,

and perfected enterprise concepts by a company to other entrepreneurs. It is an

organized and well defined system of marketing as well as distribution wherein an

entrepreneur is granted the right to bring to localized markets merchandise and

services in exchange of a specified fee. The franchisor’s standards and business

processes should be strictly adhered.

According to (Grossman,2016) Government research over the years has

insdicated that the sucess rate for franchise owned endeavors is significantly better

than the rate for non-franchise owned small business.In short franchising is better than

other business option because it has more chance for sucess.

 Business format franchising gives the franchisee the rights to market franchisor’s

products and services but with the stringent requirement to observe prescribed

management and operations of a business. This way, effective business practices and

systems are handed down from the franchisor to the franchisee to help ensure

profitability and business success.

Interested entrepreneurs should completely understand franchising before

deciding to invest in it. These advantages and challenges should be considered.

Logically, the advantages of franchising outweigh the common disadvantages.

This could be the reason why many entrepreneurs, especially those with limited

resources, consider and prefer it than other business ideas. These factors make

franchising effective in the local market.

High rate of success,Franchising involves tried and tested business models. Thus,

entrepreneurs who decide to buy and operate franchises are exposed to lower

calculated risks. This makes it better than starting up new businesses from scratch,

which usually comes with greater risks.

Effective operating and management practices,Most of the time, franchisors have

already discovered and perfected processes and efficiencies that are passed on to

franchisees. Thus, franchisees could either be guided to overcome lack of business

experience or be trained in polishing acquired business sense.

Established brand,The entrepreneur doesn’t have to worry about establishing the

brand to make it a household name. The strength of the chosen brand of franchise

would be enough to entice customers and guarantee success.

 Easy options for recapitalization, Franchises can ride on the outstanding

reputation of the brand or franchisor. This way, they could easily apply for and obtain

approvals for loans from financial institutions or banks. A reputable franchise is

already an appreciating asset on its own. It can be resold or liquidated any time,

making it attractive for lenders.

Greater profit, it is possible to incur lower costs on materials and supplies through

the help of the franchisor. If sales reach or exceed targets, the franchisee will surely

enjoy greater profits. This makes franchising an easier ticket to business success.

However, franchising also comes with common challenges, which should be

effectively overcome. Interestingly, such setbacks can turn into potential strength if

handled and dealt with effectively.

Franchisors imposing control, some franchisors require their franchisees to

religiously follow their prescribed system or processes. You may eventually find

adhering to such degree of control as difficult and restricting.

Additional costs, depending in the franchise agreement, franchisees may be

required to shoulder a percentage of their operations’ revenues. The amount is on top

of royalty and franchise fee that are collected by the franchisor every month. There

may even be more charges like advertising costs that are regularly given to

franchisees.
 Possible conflict with franchisor,It is not uncommon for a possible conflict to

arise between a franchisor and a franchisee. In some cases, the franchisee thinks that a

franchisor is being unreasonable and is squeezing too much for profits. Moreover,

some franchisors may think that franchisees are getting too lax when adhering to the

franchise contract.

No specific law for franchising, currently a law covering franchising in the

country is yet to be filed and implemented. However, all parties involved are expected

to abide by the provisions of the Civil Code as well as the Intellectual Property Code.

The franchising contract can contain odd stipulations as long as those don’t fall into

conflict with existing laws, morals, national security, and public policies.

Generally, the cost of franchising will vary on the type of business or franchise.

The overall cost, however, will cover all the necessary support needed for the

business to hit the ground running. The Mother Company or the franchisor will be

providing continuous support to its franchises, including an initial training program

for their staff. The franchisee will undergo a Basic Operations Training Program

(BOTP) before they start their business operation. This, along with other training

programs will enrich the franchisee’s management and analytical skills essential to

operating the business they’ve chosen to franchise.

Statement of the Problem

This study aims to determine the significant effect of Loyalty Cards to

customer. Specifically, the study sought answers to the following question:

1. What are the Strengths of franchising food carts and stalls?

2. What are the Weaknesses of franchising food carts and stalls?

 3. What are the main benefits of franchising?

4. How to run a successful food carts and stall?

5. What convinces the costumer to make them patronize franchised

business?

Hypothesis

Null: There is no significant relationship between the strength and weaknesses

of franchising food carts and stalls.

Alternative: There is a significant relationship between the franchisor and

their chosen franchise business

Theoretical Framework

FRANCHISORS

CONFLICTS

FRANCHISEE COOPERATION
ASSOCIATION

GOVERNANCE

FRANCHISEES
Conceptual Framework

This study has two variables the independent and dependent variables. The

concept model of this study is presented in Figure 1.

Independent Variable Dependent Variable

 Self-owned business FRANCHISING

 Rules and Regulation

 Quality of Product

Figure 1.

The figure above showed about independent and dependent variables of the study.

The Independent variables are the strength and weaknesses of franchising a business

because it can affect the franchisors in managing a business.

Through the franchisor, are the one who should know what are the strengths and

weaknesses of franchising a business and how can it affect to their business which is

the Dependent variable of the study.

Significance of the Study

This study provides an opportunity for businessman and businesswomen to have

reference regarding franchising a food carts or stalls Also this study can help

entrepreneurs as they can used the data gathered for their analysis and may consider

for adjustments and improvements for their business. The Beneficiaries of this study

are the following:

This study will be beneficial to the following given below:

 Franchisors -this study will benefit the exact owner.The business will expand

and they will get some idea to build more and the franchisor owns the overall

rights and the trademark company.

 Franchisee- this study will benefit the franchisee because they don’t have to

build the brand or set up they wil know the strategies on how will they manage

their business franchise.

 Future Businessman-this study may help them decide concerning their plans

whether to prefer franchisng or not.This will serve as their companion as long

as they need guidance in establishing their business.

 Readers—it will be benefit for them because they can get different ideas when

it comes of building a business with proper and affordable price of products.

 The Researchers— through this study, they will have an effective way to

show what they learned in their research.

Scope and Limitation of the Study

 This study aims to know if a business like food carts or stalls can maintain and

establish a relationship with the consumers. This research has 20 respondents.

Respondents answered the survey-questionnaire to know their perception about

Franchising and how it benefits to them. it only covers the Owners of Food cart and

stalls at San Miguel, Bulacan.

The Researches chose the most convenient place for them considering their

situation as a student.

Location of the Study

The main place that this study needs is around San Ildefonso and San Miguel,

Bulacan. The Researches choose this location because there are lots of Food Carts and

Stalls around the areas around San Ildefonso and San Miguel Bulacan.
Definiton of Terms

.
 Franchise-- Is a type of license that a party (franchisee) acquires to allow

them to have access to a business's (franchisor) proprietary knowledge,

processes, and trademarks in order to allow the party to sell a product or

provide a service under the business's name. In exchange for gaining the

franchise, the franchisee usually pays the franchisor an initial start-up and

annual licensing fees

 Business– The activity of making, buying, or selling goods or providing

services in exchange for money.

 Businessmen-the person who takes care of the business.
 Collaboration-the action of working with someone to produce or create

something.
 Competitor-one selling or buying goods or services in the same market as

another.
 Enterprises-the main company of the business.
 Establish-to institute (something,such as a law) permanently by enactment or

agreement.
 Franchisor-The one who build the business better and more manageable.
 Hypothesis-a tentative assumption made in order to draw out and test its

logical or empirical consequences.

 Food cart--- is a mobile kitchen set up on the street to prepare and sell street

food to passers-by. Food carts are often found in cities worldwide selling food

of every kind.
 Opportunity- a set of circumstances that makes it possible to do something

 Strength- Are tasks or actions you can do well. These include knowledge,

proficiencies, skills, and talents. People use their traits and abilities to
 complete work, relate with others, and achieve goals. ... Also, a good resume is

built upon skills.

 Weaknesses--the state or quality of being weak, lack of strength and

something that is very difficult to resist.

 Stall--- is a structure that you set up to sell your products or services. They are

usually set up for a short period of time at a particular market.

 Franchisee-- sells the right to open stores and sell products or services using

its brand, expertise, and intellectual property. It is the original or existing

business that sells the right to use its name and idea. The small business owner

who purchases these rights is called a franchisee and the branch business,

itself, is called a franchise.

 St. Paul University at San Miguel
(A Branch of St. Paul University Quezon City)
3011 Salangan, San Miguel Bulacan

BASIC EDUCATION
(PAASCU Accredited)

STRENGTH AND WEAKNESESS OF FRANCHISING

FOOD CARTS AND STALLS

A Research Proposal Presented to the Faculty of

St.Paul University at San Miguel
In Partial Fulfillment in
Senior High School Academic Strand
ACCOUNTANCY,BUSINESS AND MANAGEMENT

Cruz,Erika Kirsten Ramos