Franchisor risks:
- The job of preparing to present a franchise opportunity is like re-founding a business from scratch. It is difficult to assess all franchisees to determine their financial strength and the skills required to run the business effectively. Costs are high and include Fees for attorneys, accountants, consultants, and trainers. Research reveals that nearly 35 percent of franchises fail within four years.
Planning begins with the development of the following points:
- Diagnosis of the company: where we are and where you want to go. Definition of the franchise scheme by territory, market, socioeconomic level. Market evolution: competition by business and investment level. Growth plan by stages. Financial evaluation of investment Franchiseability opinion.
Legal aspects to consider in this business scheme:
- Trademark registration Franchise offer circular Letter of intent to purchase a franchise in operation Franchise agreement Confidentiality strategies Other contracts such as distribution, supply.
Manuals necessary for the operation of the franchise:
- Operations Administrative procedures Opening Corporate image Equipment and facilities Marketing and advertising
Assistance Programs:
- Pre-opening and opening initial training where it will take place. Initial and post-opening training and training. Continuous supervision and assistance: who pays the costs.
Commercialization:
- Presentation of the franchise brochures that support the image. Franchise Offer Circular. Media plan: radio, videos, TV and electronic page…
When starting a franchise, costs such as:
Cost of setting up the system and starting up a unit.
By adding these you have the total cost to offer a franchise. The initial fee is the one derived from the development of the system, which is made up of the cost of the entire infrastructure, taking into account the human element and inventories necessary to start operations. This expense will have to be covered by an applicant to own the business in order to obtain the right to operate it under the franchise scheme, and must also pay royalties for the amount of sales and an extra percentage of the advertising fee, additional services: sale of finished product, supplies and raw materials, additional assistance and support, transfer right, contract renewal, etc. Which represent additional income for the franchisor.
Franchise Costs.
Costs to guarantee the proper development of a franchise system.
Structuring cost: depends on the objectives, strategies, infrastructure and size according to the nature and size in the development of a franchise system. Franchise launch cost: consider all media expenses, payment for space occupied in exhibitions and all promotional material to be announced.
Initial global cost:
Structuring cost + launch cost = Global Cost
Franchises to be developed: these are the units to be franchised according to the growth stages specified in the medium-term strategic plan and as a result of a market study.
Global cost per franchise:
Initial global cost / franchises to develop = Global cost per franchise
Placement cost: consider that the expenses vary depending on the level of support and support:
- Advice and evaluation of premises or outsiders. Design of the premises from project to conceptual plans. Supervision of the work. Training: it must include payments to the instructor, per diem, didactic materials, etc. Manuals and initial support: cost of operation manuals and consulting, videos, models.
The franchisee expects to be offered a registered trademark and all the technical knowledge required to operate the business as well as the time in which the investment is recovered.
The aspects that strategic planning must cover imply certain important points as well as costs in time and money, among the most important are: having a well-defined mission, vision and values considering customers, suppliers, partners, employees and society to which it serves. The business history must be widely written from the foundation to the present, in addition to defining the main objective of turning the business into a franchise and the analysis of the business concept.
Immersed in the initial step of strategic planning is one of the most important points, which is the establishment of pricing policies in such a way as to ensure the competitiveness of the company.
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