Introduction
Franchise is, from a technical point of view, a mode of distribution or commercialization of a certain product or service, in which two parties intervene:
- The owner of the brand and a predetermined management: the franchisor Interested in buying them: the franchisee
Both parties sign a contract, by which certain obligations are established:
The franchisor is obliged to:
- Assign use of the brand Transfer know-how through training and operating manuals and provide permanent assistance.
For its part, the franchisee has the obligation to:
- Comply with quality and operation standards. Train. Make good use of the brand and pay the initial fee and, if applicable, royalties.
Two types of franchise can be differentiated: the "Trademark and Product Franchise" and the "Business Franchise".
Trademark and product franchise is one in which the franchisor grants the franchisee the right to use his trademark or trade name and sell his product. This system is similar to concession and distribution contracts, examples of which are car sales and soft drink bottlers.
Business franchise is one in which the franchisor grants the franchisee the right to use its brand or trade name, to distribute the product or provide the service, and to assist it in all other aspects inherent to the business. For example, it provides you with an operations manual, quality standards and levels, training programs and also assistance. In turn, the franchisor provides assistance to the franchisee during the course of business. This franchise system is the one that will be developed in this document and there are examples of it in all areas, such as fast foods, ice cream parlors, bakeries, coffee, pharmacies, cosmetics, fashions, footwear, clothing, baby clothes, laundries, dry cleaners, bookstore, opticians, awnings, computing, gym, tires, paint shops,photo files, energy and laser copies, etc.
System caracteristics
Franchise systems are based on three basic pillars:
- A successful brand that provides objective reliability within the market where it operates An elaborate know-how that structures the style of the business and is what differentiates it from any other commercial distribution system Technical assistance provided by the franchisor, which should be aimed at keeping the network at the forefront of all other merchants competing in the field.
The franchisor's advertising, the brand's selling power, and marketing strategies add to the appeal of this marketing system. However, it is important to bear in mind that, when exhibiting a certain brand, the franchisee carries behind him a series of policies and strategies that the franchisor imposed on the market. Agree with them is a fundamental requirement for the harmonious evolution of the business.
Advantages and disadvantages of the system
Advantages: The businesses that are part of the chain have greater purchasing power than the independent businesses, so they can offer more competitive prices. They also have the possibility of carrying out more advertising and making the brand better known in this way.
This system gives the parties the following advantages:
For the franchisor:
- You can expand your business quickly, with only a fraction of the capital you would need to open branches. You do not assume the business risk inherent in each location in your chain, because it is characteristic of the franchise system that the franchisee operates "his" location on his own account. and risk. It allows you to quickly increase your presence in the market, through a careful “corporate” image. This is directly beneficial to the brand, because it causes a feeling of "growth" that translates into greater confidence in consumers.
It facilitates the obtaining of information for the planning of global and regional policies of the company, the basis of a secure commercial expansion.
Each new mouth of the franchise works as additional and free advertising of the brand, reaching consumers with the best window: the franchise's own premises.
In addition, the franchisor does not lose control of his business, as would happen if he sold the license.
For the franchisee:
- Market a recognized brand, without the need to create a name in the market yourself Receive training that incorporates you into a uniform and team business Enters the business on your own but not alone, since you have the support of an experienced franchisor, one who already owns an established and proven business.
It starts a more predictable commercial operation, because it has the franchisor's experience (both the direct one earned by himself and the indirect one, coming from the relationship with previous franchisees in the chain). In this way, the possibility of error is reduced and installation and operating costs are reduced, which results in greater profitability with less time to recover the initial investment.
It benefits from the "corporate image" of the chain, since, from the consumer's point of view, all the premises of the same brand constitute the same "company", with the "a priori" trust of customers.
It achieves greater purchasing power since, usually, it joins the other franchisees and the franchisor for the acquisition of products of common use.
The consumer also obtains benefits with this system, since it ensures uniform and quality products through adequately supplied and correctly attended stores at standardized and competitive prices.
Disadvantages: This system has some characteristics that can be taken as disadvantages for the parties involved.
- The franchisor has to share his business with a group of autonomous merchants, who also, through bad attitudes, can affect the brand. Franchisees lose a good part of their commercial independence, are subjected to certain controls and often must pay, in concept of royalties, amounts difficult to recover. *two
FRANCHISE CONCEPT
(by Rigoberto A. Becerra D.)
It is a contractual agreement between two natural or legal persons, in which one of the parties (the Franchisor) grants or assigns, under certain conditions, to the other party (the Franchisee), the rights to use its brand, logo, as well as their know-how, for the manufacture or commercialization of a product, or the provision of a service, in exchange for an initial association payment and consecutive payments in relation to the volume of sales of the Franchisee.
Here this contractual agreement is key, it must be very well carried out, of course, leaving no room for doubt to both parties. Much of the success of franchises is here.
Within these certain conditions is duplication, which is also key in this business, since the better the duplication, the better the results. In other words, the clearer the photocopies of the original business, the greater the probability of success, since the product, the service, the quality, the attention will be duplicated. The key here is what is called consistent quality.
The operating policies and the operating manual are key in the duplication of franchised businesses. Every effort should be put into getting both of these things right for the franchise to be successful for both the franchisor and the franchisee. Remember that the success of the franchisee increases the success of the franchisor, while a failure can affect him somewhat or greatly, depending on how many franchises he has.
OTHER DEFINITIONS OF FRANCHISE
Type of license under which the company sells a package that includes a trademark, equipment, materials, and administrative guidelines. *3
Business agreement in which an individual obtains from a larger company the rights to sell a well-known product or service. * 4
BASIC ELEMENTS OF A FRANCHISE
The four basic elements that determine if a business is a franchise and that have served to make decisions about it when they have been needed, are:
1. Use of a trademark or registered name
2. Payment of rights or royalties
3. Provision of services
4. Different property.
Names and trademarks are a very important asset of franchising companies. She grants or assigns it to the franchisee under certain conditions, which must be respected under penalty of repeating the contract with the loss of any association payment that has been made.
That grant of use must be through the payment of rights or royalties. That payment can be a down payment amount, royalties payable monthly, certain advertising contributions, or any other contractually established payment.
The provision of services is the third basic element. Thus, the General Trade Commission in the United States, considers that a business is a Franchise if it meets the other two requirements and also exercises some control or provides advice or services qualifying as important. So providing advertising help, training new franchisee business owners and workers, or awarding exclusive market areas are all considered important services.
The fourth item is about property. This must be different. Each franchisee owns his business.
Types of franchises
Without going into much detail, the following types of franchises can be listed, without being exhaustive:
Production franchises; of distribution; of services; industrial; associative; financial; active; multifranchise; multi-franchises; franchise corner; master franchise; conversion franchise.
Structuring the franchise
Generally, the structuring of a franchise follows the following seven steps:
- Determine the product or service of the company to be franchised Comply with legal requirements Formulate and establish operating policies Make the operations manual Determine sales, marketing and public relations Develop the training program Establish the service center.
Each and every one of these steps is important and every effort should be put into completing them well, as the success of the franchise depends on this. However, as previously mentioned in steps 3 and 4, referring to operational policies and the operations manual, they deserve special, key care.
Examples of feasible areas for franchises
Here are some business areas that can be franchised. These are:
Maintenance and cleaning; Communications for offices; Recruitment and Selection of Human Resources; Home accounting; Computerized trade exchange; Professional house cleaning; Pension for animals; Maternity centers; Billing and collections; Fast-food restaurants; Factory of skeletons for vehicles; Chicken farms; Hotels and motels; Development and Training.
Each of these areas are of great interest and importance to be developed as franchises in Venezuela, since in other countries there are alternatives or business opportunities through franchises. This satisfies the felt or created needs of the population and also generates investment and employment.
Advantages for the franchisee
In the franchise alternative, some advantages are pointed out for the franchisee. Among these we have:
Sale of products or services of recognized notoriety. In other words, you must not be inventing a product or a service, but it is already recognized and accepted by the market. This increases the probability of success in a business. Even the market is already done, it just needs to be expanded.
Help in starting the business. The franchisee receives the help of the franchisor to start his business, that is, he is not alone. This is especially important at the beginning, which is generally painful for traditional businesses.
Products and / or services exclusively. With the franchise you are receiving an exclusive product or service.
Safe and regular provision. The franchisor is interested in ensuring that the franchisee never runs out of inventories, either of finished products or of primary or secondary raw materials, that is, supplies for the business. This ensures a regular and quality supply.
Technical and management advice. The franchisor will lend you the know-how of the business. Permanent advice is important.
Training of human resources. You will receive all the help of the franchisor in the education and training of human resources. This increases the guarantee to the franchisor of the good duplication of the business.
Update of commercial techniques. The franchisor will always be interested that his franchisees are up to date in commercial techniques so that the business is more successful.
Financial advantages. You will have the direct or indirect support of your franchisor. The image of the franchisor will help you obtain lines of credit if you need them. You can even in some cases receive direct help from the franchisor.
Advantages for the franchisor
Likewise for the franchisor there are also several advantages. Among them are:
- Fast growth. This alternative allows faster growth than if it were done through other available alternatives, that is, own growth through merger or acquisition, strategic partnerships, etc. Revenue diversification Decreased administration expenses Smaller investments Fewer personnel problems Better planning.
Questions to evaluate if a business is feasible to franchise
In addition to the existence of several tests or tests that serve, after proper evaluation, to get a better idea in relation to franchises, below are some questions that can be asked and answered as objectively as possible, so that they serve to evaluate the possible success or not of a franchise. These are:
- Are you currently a profitable business owner? Do you want to expand your business quickly? Can your business be systematized relatively easily? Does your business belong to an established market? Is your business relatively easy to operate? Does your business depend on trending rather than fad? Your business is ready for long-term relationships with independent operators.
After evaluating the answers to these questions, you should then know that there is an opportunity to run this franchise successfully. The rest depends on the more information you get, analyze and decide. *one
Bibliography
www.iamnet.com/rbecerra/FRANQUICIAS.htlm
www.mechón.gov.ar / comercial / franchise / indfran.htlm
James AF Stoner, R Edward Freeman, Daniel R. Gilbert Jr: "ADMINISTRATION", sixth edition, Editiorial Pearson Education, 1996.
David J. Rachman, Michael H mescon, Courtland L. Bovée, John V. Thill,: "INTRODUCTION TO BUSINESS, MEXICAN FOCUS", Eighth Edition, Mc Graw Hill Publishing House, 1996. Omar Flores M.
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