Hard Hitting Facts From A Small Franchise Food Fart Owner

December 27, 2019 | 7:35 am 2 Comments Sisig Primo Franchise
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  • I am a thirty year old corporate slave working 40 hours a week. With a more than decent and regular monthly salary from a reputable company, I managed to set aside portion of it for a long time. It’s been 10 years of working and saving and the last time I checked, my savings are already in six digits.

    Looking at the monthly interest earned given by my bank, I was a little bit of disappointed. My bank offers a very, very low 1.5% per annum (gross of withholding taxes) which is unacceptable for me.

    My husband convinced me to venture in a small business where I can put my idle money sleeping at my bank account. To cut the story short, we gambled our money in a small business. As of today December 21 2019, our small food cart business has been operating for five years since we started our little “gambling”. Until now, its still open and operational. Its been our cash cow ever since. Though its not that easy, my husband’s hard work really paid off.

    The reason why I’m writing this article is to share our experience with our small business. From planning, research, market study, setting up the actual business and running a not so well known franchise business.

    I am looking forward that who ever will read this, will get an idea on running a neighborhood business like ours.

    Nature of our Business

    We’re always been attracted in food business. We are among the millions of people who believes that food business is unlikely to go bankrupt because we strongly believe that there’s a never ending demand for food.

    We researched food cart business franchises since restaurant franchises will really cost us a lot of money. A lot of money mean millions, in the range of ten to fifty million pesos depending on the franchise. We have limited funds and what we’re eyeing is a franchise in the range of one hundred to two hundred thousand pesos only.

    Sisig Primo Food Cart Franchise

    Another reason for this small time franchise is it will be our guinea pig. This will be our first business to establish. If we fail, we can still easily go back to our feet since the capital is not that big.

    We found a food cart franchise who’s selling Sisig. By the way, Sisig is a Filipino delicacy which is the main ingredients is chopped pork’s face skin and meat. We contacted the Franchisor and set an appointment for the food tasting and inquiry. We instantly liked the product but didn’t take the offer immediately since we’re still headhunting for possible candidates.

    Sisig Hooray is also another contender. It was booming and trending that time so we decided to ask around and researched it. Unfortunately, the required capital is really high so we passed on it.

    We went back to the first Franchisor that we talk to and discuss the possible acquisition of their franchise. Introducing Sisig Primo, a food cart franchise business offering different variants of Sisig such as pork sisig and bangus sisig.

    We were optimistic about our business venture. We believed that we can easily get our investment back in a very short period of time. We paid our franchise fee amounting to P35,000 and started the whole process of setting up our entire business.

    Our Store Location and Possible Customers

    Luckily, our friend owns a commercial space just downstair of my wife’s previous dormitory. Her dormitory was just located outside of BGC where a community is situated. The street is a pass thru to high volume of commuters (office workers and construction workers working at BGC). These streets serves as the road leading to Estrella, EDSA, Guadalupe and BGC which commuters ride MRT or Buses so we expected that a huge volume of people after working hours which is 4PM to 9PM.

    We also accounted for the dorms and apartments located in the vicinity of our store. We plan to target the dormers who are living within the community. We are trying to sell our products to employees of BGC who’s renting a place nearby our store. Usually, people find cheap but quality food when the “petsa de peligro” strikes. Since we offer our product for as low as P60, we are optimistic that our products will sell like pancakes.

    I also need to mention that the street where our store is located has different small time restaurants already established who offers home cooked meals. It was a huge disadvantage for us because they are really tough competition but we decided to shrug it off.

    Formation of our Business

    Our business is very simple in nature so setting up a corporation is not necessary. A single proprietorship is just enough. But before we head down to the several registration, we first handled the franchise acquisition.

    We contacted Silver Ace Franchising for their Sisig Primo Franchise and paid P35,000 for the franchise fee. Contracts have been signed and other documents then they scheduled us the training of our staff for the preparation of the product. They also provided the delivery date of our food cart.

    Right after that, we consulted people who knows about the business registration. We were advised that we have the option not to register it as a sole proprietorship business and just register it as a business in barangay level. That way, we only pay for the barangay permit annually which costs us P800 to P1,200 and avoid all other fees and taxes implemented by local and national government.

    To be honest, we don’t want to pay taxes. We are just a small scale business and has a little to zero history of income. We asked around the community and they said that they also don’t pay taxes for their business as well.

    We paid our barangay permit that day and had the business clearance permit within the week.

    Our Business’ Capital Requirement

    I already shelled out P35,000 for the franchise fee. Add that to the payment of store rent and advances amounting to P7,500 and P13,000 respectively. That is the rule of our landlord, we are required to pay the two months advance and one month deposit.

    Another capital expense incurred was the barangay permit that I previously mentioned earlier amounting to P1,200.

    On top of that, there will be an expected expense for the renovation of the store. We are assuming that we will spend at least P20,000 for that.

    Other Store equipments are not provided in the franchise so we’re setting aside another P20,000 for that.

    We have hired one (1) staff to be incharge of our store and agreed to pay him 400 per day. That’s roughly P12,000 per month.

    We thought that we need an emergency fund that can cover expenses for four months of our fixed expenses. This amounts to rent of (4 x P7,500) P30,000 and Salary (4 x P12,000) P48,000 which totals P78,000.

    So in short, the total capital requirement for our business is P174,600.

    Franchise FeeP 35,000
    Rent & AdvancesP 20,500
    Permit & ClearancesP 1,100
    Store RenovationP 20,000
    Store EquipmentP 20,000
    Emergency FundP 78,000
    Total Capital RequirementP 174,600

    You may be surprised about the P 174,600. But there are some reason that this budget is over estimated.

    First of all, the renovation and store equipment was inflated intentionally so we wont be surprised at the end if the expense went over the budget.

    Store Renovation Sisig Primo

    Also, the emergency fund is just optional. We just set a side extra cash to cover four months of expenses which we assumed that we won’t be able to reach our monthly quota. We also assumed that we won’t be getting the net income for four months. This doesn’t mean that in four months, there will be no cash inflows from our business ’cause there will be cash sales daily.

    Also, the salary of our employee will be taken from the daily sales of the business. So technically, the emergency fund will be a restricted cash in bank which must not be touched until our business is showing good signs of profitability in our financial statements.

    Consider it as a safety net whenever the tough time comes.

    Aside from the mentioned expenses such as the salary and rent, we also accounted the most frequent expense we’ll be having. The purchases of inventories which will be incurred twice or thrice a month depending on the sales of our business for the month.

    We budgeted at least 20,000 per month for the purchases. The cash that will be used for this is from the cash of actual sales of the business since they are directly correlated to each other. Higher sales mean higher purchases and low sales mean low purchases.

    Just to be clear, the purchases budget is not included in my capital requirement because as I have mentioned, the funds needed for this will be coming directly from the sales.

    Our Very First Employee and the Benefits

    As mentioned earlier, we have employed one (1) person who will be in charge of our store. He will operate six (6) days a week (Monday to Saturday) with an option to open the store on the seventh day or Sunday.

    His daily salary will be P400 per day operating from 10AM to 10PM. Another task assigned to him is to go to the wet market to buy other store supplies such as rice, eggs, onions, take out boxes and other supplies needed for the stores. Cash needed for this purchase will be coming from the daily sales.

    To reward our only employee, we decided to give him a 13th month pay equal to his monthly salary. We also asked him if he wants other benefits such as SSS, Philhealth and Pag IBIG but he refused because he doesn’t want any deductions from his salary. We agreed not to deduct those benefits from his salary. For us, its okay because we (as his employer) is required to pay the same amount deducted from our employee’s salary.

    A yearly salary evaluation was also implemented. This way, we as the owners, are required to evaluate our employee’s salary if it’s still fair. The criteria we’re looking at for the salary increase is the net income. A higher net income means high sales which technically correlated in the work being done my employee. High sales for the month or day means he needs to work harder since he needs to cater to huge number of customers.

    The salary increase which we implemented encourages our staff to work hard and to reward him of his loyalty to us.

    To be honest, we’re lucky we have him as our employee because he really cares about our business. He treats his business as his own.

    Bank Account Exclusive for the Business

    Since our suppliers asks us to deposit to their bank account whenever we need to purchase inventories to them, we decided to open a bank account with online banking facility. I’m a busy man and a lazy person as well. I don’t have the time to go to the bank, fill up the deposit slip just to pay them.

    Cash Deposits from Daily Sales

    As much as possible, I limit my visit to the bank at least once a month. Most of my visit to the bank is to deposit all the cash sales net of purchases and other expenses.

    I have decided to open a BDO account just as the same as my supplier’s bank account to avoid bank transfer fees and real time fund transfer.

    All the cash from sales are deposited to the account are not encouraged to be withdrawn. We want it to be our life savings for our future.

    Just recently, we noticed that a huge amount of cash is just sitting/sleeping in the bank account. A very, very small amount of bank interest are credited monthly but its not decent. I’ve done some research and found out that a certain Bank is offering a 4% per annum interest rate. That’s higher compared to the other banks. If I deposited P100,000 today and let it stay there for a year, it will earn P4,000 (gross of withholding tax). Therefore, I made a decision to move all certain portion of cash to the new high interest rate bank account.

    So how do I figured out how much cash should be moved to the new high interest bearing bank account? Simple, I compute for the outstanding payables for the month then add P10,000 for allowance. The sum of that must remain to our old BDO account which will serve as the working fund. The difference of our working fund and the cash will be transferred to the high interest bearing account.

    As you can see, there is no fixed amount to be deposited monthly to the high interest bearing account.

    Purchasing of Inventories

    I have four kinds of purchases every month. These can be categorised based on the inventories what to be bought. These are the following:

    • Raw Sisig – which can be purchased from our Franchisor. Paid in cash and deposited to their bank account.
    • Softdrinks – supplied by a roving truck of Coca Cola. Cash payment from the daily sales.
    • Other Store Supplies – purchased in wet market. Cash payment from the daily sales.
    • Store Inventories (Noodles, Luncheon Meat and Sausage) – purchased at Puregold or Super 8. Payment is paid initially using my credit card payable after a month.

    The raw sisig and softdrinks can easily be ordered thru text. My employee will just inform me whenever our stocks are low and needs to be replenished.

    Store Groceries

    While for the Store Inventories, I personally go to Puregold and buy them. My employee will also informe me of the stocks that needs to be bought and I will do the shopping the same day.

    The raw sisig, softdrinks and other store supplies are paid in cash. The cash will be directly coming from the daily sales. While the Store Inventories bought in the supermarket are paid using my personal credit card. That way, I also earn rewards points given by my credit card company. The purchase thru credit card is usually payable after 20 to 30 days and is due every 10th of the month.

    Our Non-Existing Marketing Plan

    To be honest, we don’t have any marketing plan in place. The only marketing material we have is the tarpaulin showing our menu. Since we are a neighborhood food business, we believe that our store will be known to regular passers by and BGC Dormers.

    I’ll try to figure our the next year what to do with the marketing of our products to increase our sales.

    Accounting and Financial Analysis

    Since I am a graduate of Accountancy and working as an accountant, I am well versed with the accounting and bookkeeping of the company. So I decided to set up a book that will summarize the financial activity of our business.

    I will be tasked to record all the monetary activities incurred by my business.

    To have it more convenient, I decided to build a simple journal entry system in Excel. The file contains several sheets showing all the entries, our Income Statement and Balance Sheet.

    Aside from the primary financial statements I’ve mentioned, I also included the schedule of Accounts Payable, Accounts Receivable and Fixed Assets.

    The standard chart of accounts for a small business are also used. I’ve been maintaining this file for five solid years already and to be honest, it’s really useful to me.

    Thanks to this file, I was able to track down all the expenses, sales, income and also the available cash in just a few clicks. I was also able to plan what to do with the extra cash generated by the business.

    And the best thing about it is that, its totally free! I don’t need to pay for a bookkeeper because I do all the hard work. I also don’t need to pay for the accounting software used since I didn’t have to subscribe to the paid softwares offered over the net.

    Conclusion

    Just to give you a heads up, setting up a small business really needs your full attention. You really need to spend several hours planning and brain storming before you decide to set up your business.

    The several items I’ve mentioned above are the important things you need to consider when setting up your business. You can copy it and add few more if I missed anything.

    Anyway, In my next blog, I will be sharing to you the challenges we have encountered during the first six (6) months of our operation. I will be sharing this to you so you can anticipate these things when you’re still in planning stage. Try to come up with a solution to solve the problem so your business wont get hurt.

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    • lea anne says:

      I am interested to know about your location? Is there any available space for rent? We want to franchise a takoyaki food cart.

      • Jackie Laiz says:

        It’s located near BGC. Approximately 2-3 kilometers away. Try searching in Waze or google maps, Jervois street, Pinagkaisahan makati.

        As for the space rental, I have no idea. Try going there personally and ask