When you think about being an entrepreneur and starting a business, you have the possibility of being part of a franchise and in fact it is a really good idea, which can save a lot of complications and work, if you have the necessary capital and the profile to be successful..
A franchise is a system where the owner is named the franchisor, who grants another person, who is called the franchisee, a license to operate a business that has been proven successful.
The transmission of knowledge (know how) and technology is done by the franchisor through manuals, guides, training, inspections and supervision.
The franchisee is obliged to comply with the quality of the service and products, in the terms indicated in the contract that is signed to obtain the franchise.
The franchise agreement is collaborative, where the franchisor and the franchisee have common interests. It is generally a long-term contract.
The contract must include the authorization of the use of the brand of products or services, name, advertising and the exploitation of patents.
The franchise must have an exclusivity related to a territory or a certain number of geographically identified establishments.
The most important thing for the success of a franchise is to have an accredited brand, accepted and known by consumers, due to the high quality of its products and services.
It is important to clarify that to enter the franchise business, it is necessary for the franchisor and franchisee to evaluate the advantages and disadvantages of the franchise, since there is always the possibility of failure.
In Mexico, there are more and more options for national franchises that are more accessible for entrepreneurs starting a business. An international franchise generally requires a larger investment.
Requirements to create a franchise
- Have a properly protected name and brand Have a publicly recognized brand within the market Meet a real market need Have proven success for several years Experience and seniority to have credibility Have a training and training center for franchisees Have a testing center for new organization, operation, product and service systems.
The franchise holder must also establish the following:
- The characteristics necessary for the location of the business units The minimum square meters necessary for the operation The control and supervision systems for the efficient administration and operation of the franchise The content of the contract to sign with the franchisees The percentage of the royalties for the sales of the establishment that must be paid by the franchisee The percentage of sales that must be contributed for corporate advertising The calculation of the Internal Rate of Return (IRR) so that the franchisees know and accept it.
Benefits for the franchise holder
- Expansion of the business in different national and international markets The expansion of the business is carried out through investments from others Constant income through the collection of royalties The franchise is advertised with the money that the franchisees contribute to the corporate The franchisees They can be creative and loyal partners interested in giving innovative suggestions to improve the franchise.
"Franchises are a market solution to a market problem "
Advantages of acquiring a franchise
- Have a product and / or service tested and accepted by consumers Use proven operational, commercial and administrative methods to have quality and uniformity in the products or services offered Have the license to use the brand Grow the business of faster than with another alternative or commercial alliance.
- Have a lower risk of failure than in a business that is not proven Receive advice on location, conditioning, decoration and purchase of equipment Acquire knowledge and experience for efficient business management Have access to corporate advertising campaigns Have benefits for discounts granted by suppliers, for the volume of purchase generated by the business units of the franchise.
The most important obligations of each of the parties are the following:
Obligations of the franchisor
The franchisor is obliged to provide the franchisee:
- Technical assistance and the necessary elements to provide quality service A software system that allows control of the administration, operation and Provide specialized and permanent training and training to produce and / or sell quality products or services Commercial secrets for the best operation and franchise administration A directory of proven suppliers, with preferential conditions and with quality Hygiene and cleaning regulations Organization manuals and professional procedures and their updating A comprehensive program of cooperation and assistance Assignment of a manager for the operation daily. (It can be with or without cost) Support in the recruitment, evaluation and hiring of your staff A team of expert advice on advertising and promotion plans.Advertising and marketing at all levels The necessary materials to promote the development of the franchise Advice on the development of a personalized website Advice on digital marketing strategies Calculation of the investment required and needs to start operating.
The franchisee agrees to the following:
- Respect the standards and policies of the franchisor. Use the brand exclusively in the assigned territory. Acquire from the franchisor the equipment and products to operate the franchise. Preserve and maintain the equipment working in perfect condition. Respect the organization, operation, procedures, policies. Methods, techniques Design the establishment according to the standards for corporate image Provide the franchisor with the information requested from the administration, operation, sales, etc. Pay a royalty established for the use of the franchise Acquire the equipment, materials and products with the suppliers indicated by the franchisor.
Procedure to acquire a franchise
The first contact and presentation of the franchise concept is made by phone and later with the owner or the brand's sales executive a first interview is held.
This interview is used to get to know the owner or manager so that they know who you are, what you want with the franchise and what goals you are trying to achieve.
The interview helps to understand who the franchisor is, what makes the brand an opportunity and who has the profile and ability to be successful franchisees.
In this way together they begin the process to determine if the profile corresponds to the skills and aptitudes that are required to be successful with the franchise.
During this stage, the franchisor seeks to know if the franchisee has the necessary money to undertake the business model and if there is a match with the brand's perspective.
An open and honest dialogue should be established with the representative of the franchise who, based on his experience, will evaluate the possibilities of success considering the potential of the possible franchisee.
In this stage it is convenient to seek to interview other franchisees, gather information to verify that the data provided by the franchisor is true and determine the degree of probability of achieving the expected results.
You have to get information intensively and analyze it in depth and have a diagnosis to see the veracity of the franchisor's systems and evaluate if it is a profitable business model in the long term.
Acquiring a franchise implies establishing a personal relationship, so you must know the people in charge of managing and operating the franchise.
It should be aware that the money to be invested is entrusted to the leadership of the franchise and its collaborators.
It is important to visit the corporate offices of the franchise, meet the people who make the decisions and ask them any doubts and concerns you may have.
In this phase, it is necessary to evaluate whether the franchise gives confidence and the quality of its administration and operation, since there is still time to make the decision to invest or not.
Review the COF (Franchise Offering Circular)
The COF contains the information that the franchisor must provide to its franchisees before signing the contract.
It is a document that represents a diagnosis of the franchise.
In general terms, it must contain technical, economic and financial information about the franchise, so you must make sure that you agree with the franchisor on all relevant points.
The COF should be analyzed from the perspective of whether it is a business that makes sense, if the terms and obligations of the agreement are consistent from a legal point of view.
The type of commercial commitments and the obligation to fulfill them are established.
If for any reason, in the franchise contract there are obligations or agreements that do not seem logical or feasible to fulfill, do not sign the contract.
An attorney or franchise consultant can help analyze the content of the contract.
"Being part of a franchise is an excellent business option for an entrepreneur"
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Jack Fleitman:
www.ciemsa.mx professional consultants
@jackkmex
