10 Critical Steps to Remember When Starting a Franchise
While starting a franchise is not a decision to be taken lightly, it can prove to be extremely financially and emotionally rewarding. I’m going to talk about some of the things you should do to make sure your business is a success especially franchising in Mexico.
Step 1: Educate Yourself on the Concept of a Franchise
Before you begin, it is necessary to define the term “franchise.” The term refers to a legal arrangement in which one party, referred to as the franchisor, grants the right to market products or services under their business’s trademark to an individual or group of individuals, referred to as the franchisee. The franchisee can then market the products or services according to the franchisor’s specifications. In exchange for these rights, the franchisee must pay the franchisor specified royalties and fees. Rather than a physical business or industry, franchising is a marketing and distribution strategy used by businesses. Both parties have a stake in the company’s success.
Step 2: Consider the Advantages of Franchising
Another step before you decide to franchise your business is to compile a list of all the benefits. Consider how franchising will enable you to expand much more quickly and affordably. Additionally, the more franchises are available, the greater your purchasing power. If you are considering purchasing a franchise, you can quickly realize your dream of self-employment and begin operating your business. As a franchisee, you will typically benefit from the franchiser’s ongoing support, training, and advice. It’s also much easier to buy a franchise than to start your own business.
Step 3: Consider the Disadvantages of Franchising
As with any business venture, franchising has drawbacks. As a franchisee, you will relinquish considerable control over your business. As a franchisee, you will lose creative freedom because you must adhere to the franchise owner’s requirements. Additionally, you must pay the franchiser a percentage of your profits.
Step 4: Franchise Requirements
You should conduct research into the specific requirements for opening a franchise in your country. Legal requirements vary significantly depending on your location. For example, the British Franchise Association requires all franchisees to have at least one year of business experience prior to franchising. If you are a franchisee, you should consider establishing a pilot operation with audited financial statements. This makes it easier to determine whether the business will be profitable.
Step 5: Intellectual Property Rights
The franchisee will receive a package outlining all intellectual property rights at the start of the franchise agreement. It is critical to safeguard the franchisee’s rights. A trademark, patent, registered design, or copyright are all examples of intellectual property. The franchise agreement will say which licenses will be given to the franchisee and how they will be used.
Step 6: Follow the Operating Instructions
If you’re considering opening a franchise, you’ll need a comprehensive operating manual. This document will summarize the critical information gathered by the franchisee during the pilot scheme’s operation. The manual will contain all the necessary information for successfully operating the franchise, such as sales, reporting, equipment, marketing, and accounting requirements. This document contains critical business information. Consequently, the terms of the franchise agreement will usually say that the terms of the agreement are private and will not be shared with anyone else.
Step 7: The Franchise’s Location
You must first determine whether the franchise you wish to open is mobile or property-based. Certain franchises can be operated from the comfort of your own home, while others require the use of customized vans. The location of the business may be critical to the franchise network‘s growth. As a result, the franchisee may elect to retain control of the location.
Step 8: Negotiating a Franchise Contract
If you are considering franchising, you must first draft a franchise agreement. This document authorizes the franchisee to operate the business in accordance with all applicable legal requirements and intellectual property rights. The agreement must follow local law, protect the franchisor, and be a useful document for the franchisee.
Step 9: Determine Franchise Fees
Before you begin a franchise, you must ascertain the associated costs. As a franchisee, you will be required to pay an initial franchise fee to the franchisor to join the franchise network. Franchisees may also be required to pay management fees, although these are frequently included in the product’s wholesale price. Finally, the franchisee is usually paid on a regular basis through royalty fees that are based on how much money the business makes.
Step 10: Recognize Both Parties’ Obligations
As a franchisor, you owe the franchisee support, training, a comprehensive operating manual, and a franchise agreement. In addition, you agree to promote the brand and not compete by not giving out more franchises in the same area.
As a franchisee, you are responsible for operating the franchise business in accordance with the manual’s guidelines and the franchise agreement’s rights. You are in charge of keeping accurate records, getting insurance, keeping your identity private, adhering to intellectual property rights, and keeping the franchise location in good condition, among other things.
