Want to know how a franchise works? This type of business is popular among entrepreneurs who want to make an investment. Setting up a franchise is always less risky than starting a business from scratch, as you are working with a recognized brand who have a successful track record in the market and a wide range of customers.
What to take into account when choosing a franchise?
Once we have decided to invest in this business model, it’s important to how to choose the most profitable franchise possible. The success or failure of your investment will depend on your choice of franchise, so this choice really is crucial. The first question you should ask yourself is: what criteria should I keep in mind when choosing which franchise to open?
- First of all, it’s a good idea to ask franchisees about their experience with the central franchisor. Their opinion about the contractual relationship they have with the brand, the help provided in the face of problems, the requirements they must meet, their relationship with suppliers and customers, etc., will all be essential to having a general idea about the operation of the franchise. It is also interesting to know customers opinions of the brand, to avoid investing in a brand that doesn’t have a good reputation. Nowadays, it is easy to find these opinions online.
- You also have to take your competition into account to determine if they could be an obstacle to the growth of your franchise, so it’s a good idea to carry out a market study.
- The financing necessary to set up a franchise. This can vary depending on the brand, so you should inform yourself about how much money must be invested and if this is within your budget.
Key points when setting up a franchise
Setting up a franchise requires following a series of key points and guidelines. If you set up your own business, you make all the decisions, but when setting up a franchise your actions must be in line with the brand’s criteria. Once you’ve decided you want to take on this project, you will have to take into account the following key points:
Supply and demand
Supply and demand must be balanced. When a business decides to franchise, we assume that it is because there is a big demand which can be met by the new franchises. This principle of supply and demand is similar in any type of business.
The franchisee must demonstrate to the franchisor that he has sufficient financing capacity to take on the project, as well as the necessary capacities and skills to carry out all procedures, in terms of both commercial activity and management.
When choosing the location, the franchisor will indicate the criteria the franchisee must follow: decoration, size, characteristics etc. They will also communicate the fact that the uniformity of a franchise is created in large part, by its brand image, so all franchises must follow the same aesthetic guidelines. In addition, the franchisor must also approve the area, which will depend on the distance from competitors and with other franchise locations, among other aspects.
The franchisor, for their part, will have to prepare a franchise manual in which they communicated the values and success factors of the business , which will have to be communicated to franchisees through training. They must also promote their brand image and demonstrate to franchisees that they have sufficient financial solvency to maintain this type of business.
The franchise agreement
Royal Decree 201/2010, of February 26, regulates the exercise of commercial activity under the franchise regime and the communication of data to the registry of franchisors. The decree states the agreement to be “the contract by which a company (the franchisor), transfers to another (the franchisee), in a given market, the right to exploit a franchise for business or commercial activity, in exchange for a direct or indirect financial consideration, or both. The franchisor has previously been developing the business with sufficient experience and success, to market certain types of products or services ”. The contract must show all the rights and obligations of both parties.
Examples of successful franchises which require a small investment
Investment is often the first obstacle faced by an investor looking to set up a franchise, so it’s necessary to choose where we want to invest well. At present there are several successful low cost franchises that don’t require a large investment. Here are some examples:
Business dedicated to weight loss treatments. Size Zero stands out for its innovation and sophistication. They have been operating in Spain for a couple of years and the initial investment is just above 13,000 euros.
Devuelving is the first online franchise store. It gives the franchisee the possibility of setting up their own online store in which they will offer consumers popular products from top brands at low prices. A large advantage of this business is that it doesn’t require a premise, rent or subsequent costs. The necessary investment is 3,265 euros.
This franchise has more than 1,000 establishments around the world and is a recognized brand. Naturhouse has years of experience in the dietetics and nutrition sector. The initial investment in this case is just over 11,000 euros.
Pulsazione offers beauty centers based on the quality of the technological devices used for treatments. This is a clear example of a successful low-cost franchise, as the necessary investment is just below 6,000 euros. This brand allows investors the option of adapting each center to suit them.
CityPlan is an app in which users can use to be informed of all the news and entertainment in their town. Shops and companies can advertise in the application by providing images, videos, information, geolocation … in addition to the possibility of sending notifications to users about offers and promotions. The initial investment ranges between 1,400 and 3,000 euros.