August 01, 2016
(Malaya Business Insight)
Couple Emmanuel and Cherie Estrada turned an adversity into an opportunity after the great 1990 earthquake devastated Pangasinan and most of Northern Luzon.
Already six years into the pawnshop business at the time, Cherie brought down the interest rates on pawning jewelry to 2 percent, lower than the average of 4 to 5 percent, in the aftermath of the quake.
Eric Estrada, chief operating officer of CB Estrada Pawnshop, one of the Estrada couple’s two children, is committed to stick to this low-interest rate for the chain’s growing business.
“What really sets us apart from our competitors is our 2 percent interest rate and competitive appraisal,” said Estrada on the company’s strategy for expansion through franchising.
At 29, Eric just entered his teens when his parents defied norms and brought down the monthly rates but he was old enough to understand that that decision was meant to help their fellow Pangasinenses get access to fast cash by pawning jewelries at minimal cost.
There were stories, according to Eric, that at the time of the earthquake people in his town of Urdaneta saved their jewelries first than any other personal belongings knowing how these could help tide them over the disaster.
Soon, CB Estrada became the go-to place of Pangasineses for pawning as they take advantage of the low interest the pawnshop offers, and beating the veterans in the trade. Soon, the pawnshop spawned other businesses: a mall and a printing shop.
Today, CB Estrada has 22 shops all over Pangasinan. By the end of the year, the chain targets to have 30 stores, covering the entire province.
Eric said the company is now ready to go out of its comfort zone and expand to other areas through franchising.
Eric, who is in charge of this strategic move, believes franchising the chain is also one way of helping other entrepreneurs get into the pawnshop business but do not know, or are just afraid, of how to go about it.
CB Estrada’s value proposition, according to Eric, goes beyond the low interest.
“We keep things simple and focused. We always have a personal touch with our customers. We always text and send letters to our pawners before their items mature and for them to avoid penalties. We even give a longer grace period before their items go for auction,” Eric said.
Unlike the competition which has diversified its offerings to include remittances and bills payment, CB Estrada is limiting its services for now to pawning.
“We have noted that customers who want to pawn their jewelries do not want to queue up and wait. By just focusing on pawning, our shops will have enough funds to service our customers,” Eric said.
Eric believes at 2 percent, franchisees can compete with the giants in the industry.
“Customers usually look out for the lowest interest and the highest appraisal as well as flexible terms, walking into each pawnshop to check their rates and appraisal for comparison,” said Eric.
This is why for future locations, CB Estrada targets to set up in areas already dotted with competitor pawnshops, a deliberate strategy to gain market.
“We are committed to stick to the core business and we know this is potential business we can share to entrepreneurs,” Eric said.
Keeping up the dynamic attitude of his mother, Eric in preparation for the franchise changed the physical look of the pawnshops, taking away the ubiquitous cell-like bars in traditional pawnshops and refurbishing these to look more professional much like a bank.
The fresh look also easily connects with customers and is simple and comfortable. “Our customers are the type who only pawn jewelries that are worth P20,000 or less.
These are the people who would renew the pawn and redeem their jewelries for the sentimental value.
These are pieces they have kept over the years as keepsakes or heirloom, or they have invested by working from abroad or sent by relatives overseas,”Eric said.
Targeting to open two branches per month to reach 500 in five years – 400 franchise and 100 company-owned – CB Estrada requires P450,000 franchise fee for five years, renewable for two terms. The total package ranges from P2.5 million to P3.5 million, exclusive of pawn capital. A franchisee needs P7 million to P8 million in the first year to start the business. The capital will go down in the succeeding years but return on investment is about 2 to 2.5 years.
CB Estrada effectively “lends” its license to operate a pawnshop from the Bangko Sentral ng Pilipinas to a franchisee.
Eric said there are lots more opportunities for the pawnshop business which now number 16,000. The population remains underserved.