Are you interested in buying a franchise? Here are tips from industry experts.
For more than two decades, Juan Manuel Gallastegui and Ferenz Feher, together with the Mexican Franchise Association (AMF), has developed a formula to guide investors interested in acquiring a franchise. His main recommendation is powerfully simple: research and win.
Basically, Gallástegui and Feher maintain that a person who wishes to invest must know three things: that it is a business model based on standards, that order and discipline are fundamental values, and that the franchisor’s business format must be scrupulously followed.
“This decision can change your life,” they say. “Therefore, if you are not convinced, do not buy a franchise, because you and the chain will fail.” The benefit of doing so, say the authors, is very concrete: “while 60% of independent projects fail to finish their second year, 95% of franchised businesses are still alive in their fifth year of life.”
The 7 issues you should know before buying a franchise
Discover the seven key issues that you must evaluate and the tips to transform this decision into a successful adventure.
1. Why do you plan to buy a franchise?
- I will obtain higher profits than in the bank.
- I will be investing in a proven business.
- I will be able to self-employ.
- I will generate a family patrimony.
- I will receive training on the activity subject to the franchise.
- I know that in my daily operation I will have the support of a solid, serious and experienced company
2. Do I have the profile to be a franchisee?
You must be willing to:
- Follow rules and operate your business (which is your investment) as directed by the franchisor.
- Accept methods and guidelines determined by someone who is not your boss.
- Sacrifice some independence.
- Teamwork.
- Respect to the maximum the confidentiality of the information that is transmitted to you.
- Be aware that the performance of your work can favorably or unfavorably affect those who make up the network.
- Sacrifice a bit of your creativity and contribute ideas for the benefit of the entire network.
3. Analyze your tastes and interests
Define the activity you would like to dedicate yourself to every day.
Before you buy a franchise, answer these questions:
A. How much money do I have?
B. Where do I want to establish the franchise?
C. How much time do I plan to dedicate to your operation?
D. What are my expectations regarding monthly profits and return on investment?
E. What level of risk am I willing to take?
4. Investigate the franchising company
- Does the franchise concept have a complete development?
- Request information from consulting companies.
- Interview with executives and employees.
- Request information from the Mexican Franchise Association.
- Visit the units that make up the network.
- Is it successful in all markets?
- Is it a fad concept or will it endure over time?
5. Ask for clear information about the relevant points of the business
- Technical assistance.
- Troubleshooting.
- Location.
- Territories.
- Training.
- Purchases and supply.
- Control of operations.
- Advertising and marketing.
- Manual update.
- Market trends.
- Seminars and conventions.
- Franchise Offer Circular (corroborates the veracity of the data).
6. Define the financial aspects
- Initial franchise fee.
- Royalties continue.
- Contributions or contributions to the Advertising and Marketing Fund.
- Other contributions.
- Investment required.
- Business operating results.
- Investment rate of return.
7. Avoid thinking about the 10 most common myths
- With a franchise I no longer have to work.
- Big industry = guaranteed success.
- I can reduce investments.
- Big chain = guaranteed success.
- I don’t want to be the first franchisee.
- I can do it on my own.
- I will modify the original system.
- There is no need to hire lawyers.
- All franchises are the same.
- I know how to manage. I don’t need to learn.