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How to Start a Lotto Franchise in the Philippines: A Guide

Entertainment in the Philippines takes different forms, with one of the most popular being participation in lotto betting. The simplicity of choosing a bunch of random numbers, with the excitement of potentially winning the jackpot, has made this game very appealing.

Because the rules are simple and don’t require much strategy, many flock to various lotto franchises across the Philippines to place their bets. The substantial number of people playing the lotto makes this a potentially successful business venture. 

In fact, the Pacific Online Systems Corporation, the company behind the E-Lotto system, reported an impressive 80% growth in income at the start of 2023. For entrepreneurs eyeing a business opportunity, owning a lotto outlet franchise in the Philippines means getting a slice of that pie.

If you want to know how to start a lotto franchise, as well as evaluate its suitability, let this article be your guide. Here’s what you need to know about the lotto industry.

Advantages and Disadvantages of Owning a Lotto Franchise

Operating a lotto outlet franchise in the Philippines introduces entrepreneurs to exciting opportunities and unique challenges. Consider these pros and cons before diving into the venture.

Advantages

  • Brand recognition

Owning a lotto franchise offers the significant advantage of instant and widespread brand recognition through the Philippine Charity Sweepstakes Office (PCSO). 

The PCSO is widely acknowledged as a reputable and trusted institution, and being affiliated with this brand can significantly enhance the credibility of your business. However, it also means that, as a franchise owner, you’re representing the PCSO. You must maintain a professional and friendly environment within your outlet so your customers stay loyal.

  • Ready customer base

Unlike many business ventures that require extensive marketing efforts to reach a target audience, a lotto franchise already comes with a built-in customer base of enthusiastic players. According to the PSCO, there were 2,941,548 lotto players in 2022, representing 4% of the country’s population aged 18 and up.

This existing brand recognition ensures that your franchise already has a pool of potential customers, some of whom may be excited about the convenience of having a franchise nearby. The allure of winning the jackpot and the frequency of lotto drawing also keep constant foot traffic, as people line up repeatedly, hopeful for their big break.

  • Potential steady income

The lotto franchise, with its diverse range of games and betting options, holds the potential for generating regular revenue. The PSCO’s 2022 annual report stated that the lotto brought in around ₱27 billion in gross retail receipts, a massive increase from ₱20 billion in the previous year.

As a franchisee, even a tiny percentage of those substantial earnings means significant gains. For instance, a 1% share of PSCO’s earnings is still around ₱270 million for you.

Disadvantages

  • Regulatory requirements

The PSCO has strict regulatory guidelines for entrepreneurs looking to open their lotto franchises. You must be at a certain age when you’re applying and must submit several documents during and after approval.

You also don’t have the freedom to design the space. There are guidelines for the physical space, such as minimum floor space and counter size. As such, it’s best to familiarize yourself with all regulatory requirements and responsibilities to keep operations smooth.

  • Initial investment

While sustainable, the lotto franchise cost in the Philippines can be steep. Not only do you need to pay a ₱2,500 application fee, but there’s also the installation fee and the cash or surety bond. These fees don’t take your operational costs and other ongoing expenses into account. You must plan your finances carefully, maybe secure a loan, to handle the initial investment phase before making a profit.

  • Element of chance

Though a lotto franchise is generally an excellent way to earn money, like any business, there’s an element of chance for success. Factors such as jackpot sizes, ticket sales, and market dynamics contribute to fluctuations in revenue.

Don’t expect to consistently have high earnings by owning a franchise. It’s better to study your area and demographics so you can manage your expectations accordingly. For instance, opening in a mall increases foot traffic, which means potentially more revenue.

Requirements and Qualifications for Lotto Franchisees

As an aspiring lotto outlet franchisee, you need to understand the qualification and application process and consider your readiness to handle the lotto outlet franchise price in the Philippines. Here are the requirements:

For individual applicants

Qualification

  • Must be a Filipino citizen and at least 18 years old

Requirements

  1. Submission of a filled-out application form along with the following attachments:
    • A sketch or Google Map of the proposed site, including its complete address
    • Pictures of the vicinity of the proposed site

Upon approval, you must then submit:

  1. Two valid IDs, with at least one being a government-issued ID
  2. Two copies of the latest passport-size pictures with a white background

Additional requirements based on site ownership:

  1. Barangay Certification – If you or your family owns and lives in the building
  2. Business Permit – If you or your family owns the commercial location
  3. Notarized Letter of Agreement between owner and applicant – If you’re going to lease the property where you’ll build the site. Alternatively, you can submit the notarized Contract of Lease if you’re already currently leasing the property.

For corporate applicants

Qualification

  1. Must be controlled and wholly owned by Filipinos
  2. All corporate officers must be Filipinos or the applicants existing or registered under Philippine laws

Requirements

  1. Submission of a filled-out application form along with the following attachments:
    • A sketch or Google Map of the proposed site, including its complete address
    • Pictures of the vicinity of the proposed site

Upon approval, you must then submit the following:

  1. Biodata of the Board of Directors and Officers, or Partners
  2. NBI Clearance of the Board of Directors and Officers, or Partners
  3. Secretary’s Certificate that authorizes the applicant to represent the partnership or corporation
  4. Two copies of the latest passport-size pictures of the applicant with a white background
  5. Two valid IDs of the Board of Directors and Officers, or Partners
  6. Income Tax Return (ITR) from the previous year
  7. Latest audited financial statement
  8. Certified true copy of SEC registration, Articles of Incorporation (if a corporation), Articles of Partnership (if partnership), By-Laws, and the latest General Information Sheet (GIS)
  9. Company Tax Identification Number (TIN)

Additional requirements based on site ownership:

  1. Barangay Certification – If you or your family owns and lives in the building
  2. Business Permit – If you or your family owns the commercial location
  3. Notarized Letter of Agreement between owner and applicant – If you’re going to lease the property where you’ll build the site. Alternatively, you can submit the notarized Contract of Lease if you’re already currently leasing the property.

Application Process and Procedures for a Lotto Franchise from PCSO

Once you know the qualifications and documents you need to prepare, you can start the application process. The steps are generally the same for individual and corporate applicants, which are:

1. Submit the lotto application form to PCSO

Download the official lotto application form directly from the PCSO website. Complete the form accurately, providing all the required details about your proposed franchise. You must have a separate form for each site if you’re interested in multiple locations.

2. Pay the application fee

Submit your completed application form at the PCSO Main Office or a branch office covering your proposed site location. The application fee is ₱2,500 per site.

3. Undergo the initial inspection and evaluation of the proposed site

The PSCO will inspect and evaluate your proposed site in terms of accessibility, security, and adherence to zoning regulations. They may also check on how much foot traffic the area gets to assess its viability for sales. 

4. Pass the screening of qualification and submit additional requirements

Once the PSCO approves your application, you can submit the required documents. Remember to double-check that you have the latest copies before turning them in.

5. Submit pictures of the interior and exterior of the constructed lotto booth

Once you get the notice of approval, you have 15 days to submit photos of the interior and exterior of the booth. They must adhere to the PSCO’s requirements, which have strict measurements. There’s no franchise fee for setting up the lotto booth, but you need to pay ₱10,000 for installation.

6. Post the cash bond or file the surety bond to GSIS

The PSCO requires either a cash or surety bond as security for defaulted taxes or other obligations before you can operate. The office determines which you need to file. 

Cash bonds cost ₱300,000 for locations within the National Capital Region (NCR), ₱200,000 for cities outside NCR, and ₱100,000 for municipalities outside NCR.

On the other hand, surety bonds, with a premium cost of ₱13,864.32 for two years, cover ₱700,000. Filing this type of bond has its process and goes through the Government Service Insurance System (GSIS).

7. Sign the agency agreement

Once everything’s in order, sign the agency agreement at the main PCSO office or branch office.

8. Attend the training and secure supplies

You and your tellers need to undergo a mandatory one-day training program to run the lotto franchise. You can also secure all your supplies from the PSCO Warehouse or designated branch office.

9. Prepare the site and conduct an ocular inspection 

Prepare your site according to PCSO guidelines. They will send representatives to perform an ocular inspection to verify your readiness for terminal installation.

10. Install the terminal

Skilled technicians will come to install the lotto terminal within the site.

11. Activate the lotto terminal online and start operations

Following the successful installation, initiate the online activation of the lotto terminal. Now, you can begin operations and sell lotto tickets to your eager customers.

Responsibilities and Obligations of a Lotto Franchisee

Lotto franchising comes with a set of responsibilities and obligations. Understanding and fulfilling these roles ensures smooth lotto outlet operations and upholds the system’s integrity.

Roles and duties

  • Operate the lotto outlet

As a franchisee, you’re responsible for providing a suitable location, necessary equipment, and trained personnel for efficient operations.

  • Sell tickets

You or your tellers need to sell lotto tickets at your location and provide receipts for every transaction to guarantee security and accountability within the system.

  • Pay taxes

Every business needs to pay its taxes. In your case, you must pay your fees to the government and the PSCO, including the documentary stamp tax, withholding tax, and value-added tax.

  • Report sales

You’re obligated to report your sales and income to the PSCO and submit any necessary documents or records. These help maintain transparency and keep your site compliant with regulations.

Remember that the PSCO requires their franchisees to reach a monthly sales quota of around ₱300,000 to ₱600,000, depending on location.

  • Maintain cleanliness and security

Dirty surroundings can turn customers away, so keep your site clean. Not only does it uphold professionalism, but it also prevents crucial documents from getting lost. Keeping everything orderly also means making sure the terminal and printers work correctly.

Another duty is keeping data secure to ensure fair play and prevent fraud. Safeguard customer information and transaction data to uphold the integrity of the lotto system and foster trust among customers.

Rights and privileges

  • Commissions, incentives, and bonuses

You’re entitled to commissions, incentives, and bonuses from the PSCO based on the sales and performance of your lotto outlet. You can earn 7.5% commissions from jackpot-bearing games, 5% for digital games, and 10% for scratch cards.

  • Percentage of the winning bet

If someone has a winning ticket from your outlet, you can receive a percentage of the winning bet. The maximum amount you can receive is ₱500,000, depending on the prize won by that lucky customer.

  • Authorized use of PCSO trademarks and brand name 

Since you’re operating the franchise under the PSCO, you can use their brand name, logo, trademarks, and any provided printed materials or paraphernalia.

  • Allowed to operate the lotto outlet

As a franchisee, you’re allowed to operate your outlet in accordance with the laws of the Philippine government and the rules and regulations outlined by the PSCO in your agency contract.

  • PCSO-supported training, technical assistance, and customer service

Access to PCSO-supported training programs ensures that you and your staff are well-equipped to manage the lotto outlet efficiently. Technical assistance is also available to address any operational or technical challenges. PCSO’s commitment to customer service extends to assisting franchisees in providing excellent service to their customers. 

Have the Odds in Your Favor

Starting a lotto franchise is a unique blend of entertainment and entrepreneurship. With the potential for steady income, brand recognition, and support from PCSO, the benefits are enticing, especially with the commissions you can receive.

If you’re considering this type of business, or other type of franchise like travel agency franchise, thoroughly plan your finances, including working capital. You can take on a business loan to alleviate the strain of the initial investment on your wallet.

For financial advice and support, Zenith Capital can be your ally in securing a business loan in the Philippines. Here at Zenith Capital, we offer tailored financial solutions designed to meet the specific needs of your franchise venture. Contact us to explore our services or apply for a loan today!

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