How to choose a franchise: advice from the founder of online stores

His Work / by admin / December 26, 2019

Philip Leites

CEO and founder of online stores "True Coffee».

Almost every entrepreneur with a free capital, thought about buying a business franchise. By estimates Franshiza.ru, held in 2017, operates 1,470 franchisees (franchise sellers) in Russia. There are plenty to choose from.

However, the high competition leads to the emergence of unscrupulous franchisors. With that out of the 1470 companies in the market are active in no more than 700: someone can not cope with growth rates, and somebody just launches a broken model and franchise buyer gets victim.

Why then should be ready to aspiring entrepreneur and how to determine what the franchisor he should work, and with what - no? Try to understand.

1. Find out what kind of franchise you buy

First you need to understand that the franchise - this is when one party (the owner of the business - franchisor) transfers other party (the buyer of the franchise - the franchisee) the right to a certain type of business, using the developed business model. In fact you are selling expertise and implementation tools are already working and profitable model.

instagram viewer

International Association of the United States franchising (IFA) identifies three areas of business franchising.

Franchise trademark

The franchisee is entitled only to use the trade name. For example, the brand of "Masha and the Bear" cartoon has grown into a franchise all kinds of baby products - more than 600 species, from coloring to dishes.

Franchise for distribution

The franchisee receives the right to sell a specific product or localized franchisor. For example, a sale of the new markets (Coca-Cola, Chevrolet) and expansion of the local distribution network, where the franchisee becomes a new point of sales (a network of shops "Chebarkul bird").

"Clean" franchise

The franchisee is given the full business cycle (including a license, the physical production expertise to work, marketing strategy, Quality control process, etc.). Most of these types of franchises used in the restaurant industry (McDonald's, Starbucks and others).

In the first two versions of the franchise purchase involves the direct participation of the franchisor in the process of market entry and development - that he owns the brand (or an image, or a character).

"Clean" franchise, including the model assumes that the parent company, transferring its franchisees experience and franchisee-book (a set of rules on the launch and operation), gives him relative freedom actions. In most network coffeehouse franchisees may choose about 5-10% accompanying menu - chocolate bars, muesli and so on. However, there is a reverse version. For example, McDonald's strictly regulate every process from placement (Only premium properties and the best location) to the menu (the franchisee has the right to add their positions).

2. Check your franchisor

Once you have figured out what is deductible and what it is, it's time to think about how to check on the integrity of the franchisor.

A good franchisor has nothing to hide from a potential partner.

network performance and individual points - the best advertisement for it. Another thing, if the success of a business figures are inflated.

Feel free to check the franchisor. For example, on FNS website can look all the data of the legal entity: company founder who and what kind of share capital, to find out the date of registration, and so on. There are various databases (I like "Circuit. Focus"), Where you can see the financial performance of a legal entity for tax reporting.

3. Talk to existing franchisees

The next stage of confirmation of trustworthiness of the franchisor - to talk to his current franchisees. They have already gone, which is waiting for you, are aware of the many pitfalls can tell profitability their business and what to expect from working with the franchisor.

For the parent company should not be a problem to transfer your contacts franchisees. But if the franchisor for some reason can not introduce you, this is an occasion to reflect - whether it is necessary to work with a non-transparent company.

If you are convinced that you are starting to work with respectable franchisor, then we move on.

4. Find out if your own business from the franchisor

There are cases when the parent company sells a franchise, but does not conduct a business. Practically, this means that the franchisor teaches others to do business, even though there is no evidence that he can do it himself.

The company can not sell expertise in business start-up, if it does not have the actual experience.

Expertise in any fast-growing niche becomes obsolete within a year or two, or even faster. You can not teach another how to open a coffee shop, if you yourself did not do (or did a long time ago). Even the world's market leaders - Starbucks and Costa Coffee - regularly open their own coffee shop to watch the market from within.

5. Find out who manages the franchise network

In most cases, the parent company itself manages the franchise network. However, there are some features that it can give to outsourcing - for example, search for new franchisees. It is engaged in trading companies, which also develop proposals themselves.

The structure of the management company with franchises should look like this:

Work with potential franchisees (after the initial examination).
Working with franchisees signed (at start step).
Work with existing franchisees (in our experience, is closer to 6-8 months of work when partners come to the point of payback).

All the processes of interaction with franchisees after their acquaintance with the proposal franchisor should conduct itself, not through outsourcing. Only the franchisor has the expertise how to act in a given situation to start or development of the project.

If the control is no clear structure of franchising, it means, and to work with you will not have any structure.

Output

You have with the franchisor has a large common goal - to make profits. He will not work for you, but clearly explain what needs to be done to ensure that its business model profitable.

In the market of franchises highest bid, so entrepreneurs are not only important business indicators, but also the philosophy of the parent company: ideally should find not only the franchisor and the like-minded. As is known, if the business is not fun, it is not necessary to run.