when you have a business and it is going well, it is growing and it is having a lot of sales, it is normal to think about expanding it. And one of the ways to do it is through franchising. But how to create a franchise?
If you are considering carrying out this type of company and want to understand it perfectly before doing anything, below we are going to help you take all the steps you must take. Shall we start?
What is a franchise
To know how to create a franchise, the first and most important thing is to understand the concept of it itself. A franchise is an agreement by which one company allows another to use its name and sell its products or services.
In short, two important figures would act:
- On one hand, the franchisor, which would be the person who owns the company and who will give permission to use the brand, name, products, design, etc.
- On the other hand, the franchisee, which is the person who will use all of the above in exchange for paying the franchisor a series of rights (image, brand, products, etc.).
We have many examples of franchises. One of the best known is McDonald's, as it is available in various parts of Spain. Not all stores are the company's own, but others are built using the figure of franchises in such a way that those who have a store may be interested in using an already known and established company so that their success is greater because , since it is something that is already known and even desired, it is easier for clients to arrive sooner (and you have greater recognition than if the company is set up from scratch).
What is needed to set up a franchise
Now that it is clearer to you what a franchise is, and before talking to you about how to create one, it seems more useful for you to know what the prerequisites are to take into account to set it up. And one of the first and most important is that those interested are going to have to register as self-employed or as a company. They will never let you set up a franchise if you don't meet this requirement, so you must mark it as mandatory. But it is not the only thing you should take into account.
In addition to being self-employed, you must be aware that, when you choose the franchise you want, There will be a series of payments that you will have to face to move forward. On the one hand, you will have the entrance fee, That is, a price that you must pay to "affiliate" with that franchise and be part of its group. On the other hand, you will have the royalty payment, which is a rate that will depend on what you sell in the brand's store. That is, if he buys the products (or requests them) and sells them, he will not keep all the benefits but will have to pay you a portion of the profits or sales.
Another point to keep in mind when setting up a franchise is that you will not be alone. As a franchisor you are obliged to provide support and assistance so that you can sell, so that you run your premises well, etc.
How to set up a franchise?
Now, how about we talk to you about how to start a franchise? If you have a company that is already large, that can be successful as a franchise because more and more of your products are demanded and you can expand, the steps you should follow to achieve this are as follows:
Register the company in the Franchisor Registry
This is one of the first steps, although, if we stop to think about it, before carrying it out, all aspects related to the franchise must have been 100% defined: such as the business model, conditions for franchisees, etc.
We could say that registration is an essential point, especially if you want it to be considered a franchise legally. Also, in case you don't know, this will mean that you have a specific regulation, the Royal Decree 429/2006, which regulates the franchise system (modified by Royal Decree 201/2010).
In this way, you will legally be considered a franchisor.
Establish what your headquarters will be
Every franchised company has a headquarters, that is, a headquarters that is considered the command center of the companies, from where they can obtain information, assistance, help, etc.
This headquarters It could be the company itself or others that have been set up.. For example, imagine that the company is in Valencia. But you have already set up a store in Seville and this is the franchise's headquarters because it is where you are going to manage the franchises. Is it clear to you like this?
Have the franchise agreement and operating manuals
El franchise agreement It is one of the most important documents because it will contain the rights and obligations of each of the parties.
Meanwhile, the Operation manuals refer to documents in which they will have all the information about the company so that they can adopt their vision, mission and philosophy in general in the stores they set up.
set limits
The fact that there are many people interested in your business and who want to start franchises can be very encouraging. But be careful, because if you accept anyone, then the fame that these stores can give you may not be the best.
When Choosing those who will run the franchises must take into account whether they will meet the profile. Which profile? The one that you yourself have defined to have a basis on which to pass a filter with interested people.
At the same time, you should also go little by little. You may want to move fast; But it is better to establish a few stores, see that they work well, and move on, than to want to build a lot of stores and in the end have them work at half speed or have a bad reputation for the brand.
For example, stores where the customer is treated poorly, where they cheat with the accounting to pay less, or where they do not follow the same style as the others (they have changed the colors, placed their own logos, etc.).
As you see, Setting up a franchise is not expensive, But you must take into account the steps you must take to do everything legally and without any loose ends. Do you have any doubts? Leave them in the comments.