The definition is the least important, but still need to get an idea of the issue that you are talking about. Franchising: a form of continuous collaboration for the distribution of goods or services between an entrepreneur (Franchisor) and one or more contractors (Affiliates or Franchisees), independent of each other both in terms of economic as well as legal, who enter into a contract. The agreement provides that the franchisee can take advantage of the know-how the Franchisor, its brands and other possible forms of assistance established upon the commitment to adopt trade policies and image of the same and respect Conditions freely determined.
So far so clear, the formula is simple, like, really like, picking up large file supporters, mainly for two reasons. First of all, because it allows those who never approached the business to quickly acquire the skills needed to carry out an activity, and then it generally requires lower investments than those who decide to start their own independently. But is it really so easy? And what are the issues to be considered to open a franchise that has happened?
Certainly it is true that the risk of failure is less than independent businesses. However, such a risk exists and you should keep it in mind. Currently, less than 5% of franchise businesses fail, compared with an average 80% of businesses that typically do not exceed five years. Extremely positive that improves clearly if you look at the major cities and shopping areas more vital. The franchise is not always a business, and the fact that there are almost no barriers to entry does not mean that we can improvise entrepreneurs overnight. It must be able to manage the staff, have administrative skills and problem-solving skills, and have a vision that allows differentiating your store from all others. But also know how to manage stress, risks, and long working hours that each activity implies.
Furthermore, there are a whole series of problems, which instead are specific to the franchise. First of all the relations with the franchisor, which not only sets out the strategic choices but then verify that these are applied in practice by the franchisee, which is so to always operate in a regime of incomplete decision-making autonomy.
Second, but not least, the appeal of the franchisor; if an automaker has lost market share, dealers cannot do nothing but watch helplessly as sales decline. Similarly, if a franchisor sees undermined its reputation, the effect affects all its affiliates. It is always good practice to request in advance the last financial statements of the group to verify the financial situation, analyze the trend in revenues over the years, assess the feasibility of the business model offered and consider the payback period estimated to fall by the initial investment.
Another major issue is then the choice of the sector in which to invest. Spas, gyms, Entertainment Centres are definitely among the most popular and still show great potential for growth, but the most promising are definitely the big distribution of food, specialized services such as vending machines and dental clinics, and the ‘ clothing but in recent years has lost significant market share. Follow the cafes, pizzerias and in general all services of fast food. Before making a decision is very important, therefore, to draw up an in-depth market analysis. Wondering whether it is appropriate to undertake some type of activity in a period of crisis; when every day it closed hundreds is a choice far from irrelevant.
Then remain to deal with the other two chapters, however, common to all types of enterprise: the bureaucracy and investment.
On investment, however, you cannot make precise estimates because they depend heavily on the type of brand that you decide to bind. On average, however, it is about 30-40 thousand dollars, which must be added the contribution of entry or Fee, usually in fixed and variable food in franchise of products and services, the cost of renting the premises (considering a point of sale 40-80 square meters located in a very busy area), the decor if not provided by the franchisor, the costs of personnel management, advertising and those of the various users. All issues to be considered carefully in order to understand the economic importance of the initiative.
