Franchising: a successful model for entrepreneurs

Franchisee errors

Bad choice from the beginning

The first mistake can come from the very moment of choosing the franchise, because the franchisee often lets himself be guided by the glamour of a firm, or because the salesman has overwhelmed him, explains Juan Manuel Gallástegui, franchise consultant

Moving away from the business model

When it comes to operating, the main mistake is when you try to deviate from the business model that constitutes the franchise. “If you follow the model you will be successful,” says Gallástegui.

Over-investing in the premises

It is the item that most often breaks the initial investment calculations. It is necessary to analyze well what each dollar invested is for, because it is the only item in which you can save in the first months.

Be quick to open up

Everyone wants to get their establishment up and running as soon as possible, especially if they have to pay rent every month it is closed. But it is better to wait until you have all the suppliers and the necessary training.

Remember, “the first week will determine whether the clients return or not”, says Claudio Nóvoa, head of franchises for the Spanish magazine Entrepreneurs.

Excess staff

“One of the mistakes is to believe everything the franchise tells you without waiting to do your own analysis,” says Nóvoa.

This blind confidence can lead the investor to incur unnecessary expenses, especially in the first year of life.

Scrimping on stock

It is very common that in the early days the franchisees tend to be prudent and austere in the acquisition of stocks, so it is important to be advised by the headquarters.

The client is different in each place

As in traditional trade, a model valid for one area is not guaranteed to be successful in another.

Franchise advice

The best franchise does not exist

For this reason it is important to make a self-evaluation that allows you to know how much money you have, what you like to do, third party where you want to operate; and if you are going to do it alone, with someone, or you are going to entrust it to a third party. “This way I discard what is not within my reach, my tastes, or territory where I operate”, lists the franchise expert, Juan Manuel Gallástegui.

Enter operational details

Not only go to ask and detail financial aspects, not only how much the franchise will cost, in terms of recovering your investment, or what the monthly return will be; “also ask what the technical assistance consists of, how I am going to be trained, how I am going to get the necessary inputs to operate the business… go a little further into the operational issues,” says Gallástegui.

Research

Once you have made the above inquiries, you must make a decision, and to do so you must make a final investigation, find out how serious the company is, if it has not had problems with other franchisees.

How to do it?

Go to a specialized consultant, national trade or franchise entities; and/or make a couple of visits to other franchisees, to ask them how they have done, how the franchise has responded.

It can all be summed up as: investigate before investing.

Franchiser errors

Expansion at all costs

Some brands are very aggressive in attracting members, they only see growth, without considering the maintenance of the network as a goal.

The associate is not a number

The franchiser must see the associate as something more than a lever for growth and profitability. According to Claudio Nóvoa, head of franchises for the Spanish magazine “Entrepreneurs” is “the big mistake” at the beginning of the life of the franchises.

Excess of optimism

A very common mistake is to overestimate the perception of the brand in the market, and the reality is that it tends to have a much lower diffusion, compared to the idea of the managers.

Neglecting the operational side

Not designing specific operational processes for franchises is one of the biggest failures. Their internal management, compared to the companies’ own units, is different in terms of personnel, accounting, or finance.

Too soon

One of the sins is to franchise without knowing the business in depth, without having standardized it correctly and without evaluating costs, point out from entrepreneurs.

Not having a roadmap from the beginning. “This starts by being very clear about the reasons why one wants to franchise. Otherwise, the lurches and the failure.

Franchiser’s advice

Keeping control

Grow more slowly if the franchisee seeks to maintain control and pamper his brand, he will earn less money, grow more slowly, and work hard for the franchisees, even sometimes for free, just to make the business go well.

If he wants to make money above all, he will grow fast, he will grant the franchise to anyone and he will manage a gigantic network where everyone will do what he wants, resenting the brand, explains Claudio Nóvoa.

Is the chain solid and profitable over time?

To do so, it is necessary to study the existing market very well, evaluate what differentiates it from the rest, what added value it provides, and analyze the proposal very well.

You need to have differentiating elements in products, image and brand to enable clients to quickly grasp the concept and incorporate it into their daily lives. Not to be just another one.

They will not have your desire in the project

It is not the life project of the franchisees, they do not know him as the founder, so they will need good support, coordination and supervision in the network.

That the idea works anywhere

The franchiser must ensure that his idea can work both in one part of the country and in another part, not only where it is proving successful. Because not all of Central America is a commercial center of the capital city.