Most of the entrepreneurs who have considered the franchise option, is because they have seen in them the perfect strategy to quickly expand or expand their company.
Many of the franchises with the greatest expansion are those that belong to service companies, medical assistance, education, telecommunications and, finally, food companies, being in this sector where it is most noticeable for our economies.
In more technical terms, franchising or franchising is a way of distribution or marketing of a certain product or service, in which the franchisor (owner of the brand) and the franchisee (interested in buying it) intervene. Clearly it is seen that we are talking about a contractual relationship between two parties, which with their "society" profit commercially.
There are two forms of franchise:
* Product and trade name: in this, what matters is what is sold. A clear example is in the automotive sector.
* Business format: in these, what matters is how the business is managed. Examples of these are fast food franchises.
The franchises in short, turn out to be commercial strategies to face (aggressively or defensively) the big world corporations.
Symbiosis itself is very simple.
Franchisor
1. Assign the use of the brand to the franchisee.
2. It gives you complete advice in the form of training, through which the know-how is transmitted.
3. Likewise, deliver the operation manuals.
4. Provide permanent assistance.
The franchisee
1. Commits to maintain a standard of quality and business operation.
2. Undergoes training.
3. Put the name to good use.
4. Pay the initial fee and royalties, if applicable.
This strategy is quite interesting, not only because of its complexity of assembly, but also because it is a two-way business opportunity. In other words, it can be developed as a franchise business creation business as well as a business opportunity for a franchisee entrepreneur.
The first approach is a response to the global economic situation. Large transnational corporations may at some point take over the market, given their budgetary and management advantages. In a pressing situation of expansion, it is feasible to consider the option of allowing another person to exploit our brand, if in return its presence is strengthened at the national and international level. This means that it is perfectly possible to franchise our companies to conquer new markets.
In the second approach, we talk about small entrepreneurs who nevertheless have the ability to move the business forward. They are looking for a relatively safe option to invest their money and energy to develop their individual economies. Thus, they are quite receptive to investing in proven ideas and business models.
Advantage
Franchisor:
- Expand your business risk-free. Strengthen your presence in the markets. Obtain information for global strategy decision-making. Do not lose control completely.
Franchisee:
- Market with a recognized brand.Receive training and support always.Reduce the possibility of making mistakes.Reduce installation and operating costs.They have the trust of customers.
Disadvantages
Franchisor:
- Share the business with freelance entrepreneurs who can affect the brand.
Franchisee:
- You lose business independence (control). High royalty credit that is difficult to recover.
However, we must consider several nuances before making the final decision:
1. The low risk associated with franchising can be misleading. In reality there are always risks, what is here is to minimize them. Only if the franchise has proven experience and the company that acquires it is capable enough to adapt it to local needs and maintain it over time, then success is almost certain.
2. Franchise costs can start from $ 4,000 and reach several million, royalty payments are usually annual, but the cycle may be less.
3. The economic and political situation of Latin American countries may undermine expectations, this due to the weakening of markets due to instability.
4. The acceptance of a franchise in a new market can be variable, for this reason it is vital to carry out serious market studies before starting the negotiation. It is about making sure that the business will work in the country, as well as in the country of origin.
In any case, experience indicates that the Latin American market is receiving more and more companies of this type every day, and even quite a few local entrepreneurs are choosing to promote their own franchises to export them; For example: Mexico, it exceeds 600 associates in the field, in Chile there are more than 75 franchises operating, in Colombia there are 83 franchises, Ecuador is a market in which 67 franchises operate, in Argentina in 1998 two billion were billed dollars in franchises.
Many believe that a franchise is the smartest way to do business today. You as an entrepreneur, what do you think?
