How to invest in a franchise? Undertaking is one of the bravest decisions a person can make, and also one of the most satisfying. It is true, it is not easy to start a business and make it grow, maintain it and even survive the moments of crisis that may arise. However, it is possible to be successful and today there are already options that lighten the challenge of starting a business; franchises, for example, are positioned as one of the best investment alternatives.
According to figures published by Feher Consulting in December 2022, More than 1,550 franchise brands operate in Mexico, of which 83% are national and 17% foreign. There are more than 90,000 franchised units in the country, which generate more than one million jobs. This gives us an idea of the size of the sector and the opportunities that exist in it.
Decide your path: Alone or in company? Find out how to invest in a franchise
So, if you have already made the decision to acquire a franchise, you have to know that there are several things that you should consider before making your investment. Like any business, there are aspects to study and verify, so that everything goes well and you are sure of the decision you are making. Next, we share some of those points that you should analyze when you become a franchisee:
1. Analyze your profile
Think if you can really invest in a business in which you are acquiring the right to use a brand and all its protocols and procedures, but whose owner is still the creator of it. On the other hand, you should know if you can align yourself with the business model of the franchise, which already has a work system done and tested (including recipes and ways of doing things, for example). If you want to implement your own ideas, franchising is probably not for you.
2. Identify the turn of your preference
You should choose a brand that you like, with which you feel comfortable. Think about some activity that you know how to do and that you like to do, because it is very likely that, even if you have a team of people, one day you will have to get your hands on the activities of your business. You should know that the food and beverage industry represents more than 32% of the sector, with more than 17,000 units.; specialized trade has 10.2% of the franchises in the country, followed by specialized services (with 7.8%). So there is a universe of brands to choose from and your decision must be made with time and calm.
3. Investment conditions
In addition to investigating the investment amounts that each brand has, you should also study the conditions they have arranged to become their franchisee. Some ask for an advance and give facilities to pay the rest; Others accept that only one person makes the investment, while others prefer that a group of investors acquire the franchise (it depends on the amount of the investment).
Before signing, accurately research this information and verify in the contract that all of the above is stipulated correctly.
You should also investigate the company that sells the brand you chose: its background, seniority, reputation, comments from other franchisees, market position, sales, etc. Also find out if the utilities they offer are in line with the experience of other franchisees who are already operating.
4. Legal aspects
Each franchise must deliver several documents at the signing of the contract between the franchisor and the franchisee, among which can be found the Franchise Offer Circular (which supports the information presented in the promotion of the franchise), confidentiality agreements and minutes constitution, among others. Before signing, you must read each clause carefully and check that everything that was offered when requesting the acquisition of the franchise is being complied with: rights and obligations, duration of the contract, renewal, exclusivity, assignment of rights, location of the franchise, sanctions and limitations.
In some cases, the interested parties sign a “letter of intent”, which helps the franchisor to analyze the financial capacity of the investor, his profile and the degree of adaptation to the business model. However, it serves both parties, as it builds trust and a certain bond between them.
As you will see, there are several things that you should study before choosing a franchise and investing in the sector. You should also know that, although it is true that franchises are a very noble business and that it gives many advantages, compared to other businesses, they are not magical companies. You have to work on them and have the patience for the returns on investment to arrive, which are not immediate.
A range of possibilities
Today is the best day for you to decide to start and have your own business, with full knowledge of the investment you will make and the project in which you want to participate. Any investment implies a risk, that is why it is important that you inform yourself and investigate the sector, the brand and what is around it. Remember that franchises offer an incredible range of options for you to become a successful entrepreneur.
“A business that makes nothing but money, in a poor business”, Henry Ford.
ferenz feher Ferenz Feher is CEO and founder of Feher Consulting and has over a decade of experience in business development and business consulting.