A DIRECT competitor started franchising their concept for P500,000, adding a few extra million pesos for construction. After checking out their mall locations available for franchising, I noticed many were where I had closed down branches because of low foot traffic. Many locations on offer were mostly lemons, with a higher chance of franchisees losing their investment, regardless of effort.

The sad part is, that the franchisor makes money regardless. The franchisor secures a guaranteed customer who pays for the product upfront in cash, and the business' footprint grows exponentially funded by other people's money. The franchisor can sell products faster, enabling them to purchase goods cheaper in bulk, earning a markup from every item they sell. So while their franchisees' capital is stuck on inventory, the franchisor has earned the spread, gaining more capital to market the concept and their franchising model to attract future franchisees.