A franchise is a product or service marketing system, based on the close and continued collaboration between legally and financially independent companies: the franchisor and its franchise holders.
The franchisor, in exchange for economic compensation, can grant you the right to independently operate a business concept that has already been successfully tried and tested, in a set time period and area; permitting you to use
- the franchisor's trade name or product or service brand name
- its know-how
- its technical and business methods and procedures
- intellectual property rights
- the frachise holder's previous experience, with the constant provision of commercial and technical assistance
The terms of this business collaboration are governed by a written franchise contract.
Advantages and disadvantages
Advantages for the franchisee:
- Set up your own business without the need for commercial or business experience
- Use of the possibilities that you are offered by a company with a business method and know-how experienced and profitable
- Use of a consolidated brand image
- Advising during the start up period, collaboration in the search for premises, provision of furniture and equipment, and training of staff is included.
- Commercial and technical assistance permanent once the business is set up
- Supporting the franchisor with advertising and marketing
- The granting of an exclusive geographical area preventing competition between the different members of the chain
- Reduction of the risk business
- Lack of independence. The future of your own business is bound to that of the franchisor's
- Loss of personal style when becoming part of a larger business with its own style
- Constraints imposed by the terms and the conditions of the contract on the form of managing that you may think limit the growth of your own business.
- Costs: entry fee and continual payments to the franchisor
- Acquire a franchise
- Define objectives: investment, use of premises, way of autooccupancy, etc.
- Determine the activity sector.
- Select the brand.
- Request advice from experts.
On the basis of the mandatory precontractual information provided by the franchisor, 20 days prior to the signature of any contract, precontract or payment 1:
- Identification of the franchisor (independently of his/her nationality)
- Accreditation of having awarded for Spain and in force the title or the license for use of the brand and distinctive signs of the franchisor company with indication of the duration of the license
- General description of the activity sector. Type of products or services marketed. Quality and placement of the latter
- Experience of the franchisor company
- Content and characteristics of the franchise and its operation
- Structure and extension of the network in Spain
- Essential elements of franchise agreement (duties and obligations, duration of the contract, resolution and renewal conditions, exclusivity agreements and limitations on the free availability of the franchisee).
And, in particular, the information referring to the future business unit:
- Economic aspects: total investment to be made, payments to the franchisor, provisional operation accounts (volume of business, activity and return ratios, etc.)
- Success factors: location, potential clients, operation equipment, perception of the value of the brand, etc.
- The amount of the investment depends on the activity sector and particularities of the new business unit
- Payments/licence fees:
- Initial payment or start up licence fee: the aim is to compensate the franchisor for expenses inherent to the project (production of handbook, drawing up of contract, selection and training of the franchisees, etc.)
- Royalty or operating or functioning costs: amounts that are paid periodically to the franchisor for the use of the brand, the continuing assistance and the transfer of new knowledge related to the business usually calculated on the basis of a percentage of the sales made.
- Advertising payment : involvement in the costs of nationwide advertising campaigns. Usually collected in a special account that can be controlled by the franchisees
- Type of investment to be made: Equity (premises, land, etc.) or of operation
- Type of financing
Attitudes and personal situation
- Make a critical review of the strong and weak points. Be sure to have the necessary capacity and temperament to run your own business
- Make sure you have full family support. The additional responsibility and the demand on time will probably provoke a certain level of tension
- Make sure you have sufficient capital
- Read documentation on franchises
- Visit franchise fairs
- Consult one of the several franchise year books that are published and that provide basic information on the various brands established in the country
- Request franchise leaflets on the brands in which you might be interested
- Meet the representatives of the franchisors that you are considering and make all queries you consider relevant
- Check to see how well-known the franchise is and its service or product. Beginning a business with a good reputation is an advantage
- Obtain a global look at the market. Find out the location of your competitors
- Examine the costs in detail, especially the monthly revenue rate, and determine if it is reasonable
- Establish your own business plan
And, especially, it is recommend that this evaluation process includes contact with existing franchises of the chosen brand –not only those that your franchisor may recommend-, to find out their level of success and the level of support given by the franchisor
And, finally, before taking on any legal obligation or financial commitment, ask for advice from an independent business consultant and lawyer who are specialized in franchises, preferably members of the Asociación Española de Franquiciadores (AEF), for a provisional review of accounts and the franchise contract, as well as from the Bank on the financing aspects.
- Bank Support
If you are interested, at MARCA we can offer you advice on the general aspects to take into account when considering the purchase of a franchise, as well as:
With the products, terms, interest rates and most suitable guarantees in each case:
Loans : to finance the initial investment (equipping of the premises, furniture, installations, decoration, computer equipment, etc.).
Leasing : for the purchase of amortizable goods by means of the financial leasing, with an option to buy on maturity. With tax benefits.
Loans and subsidized leasing : based on the collaboration agreements signed with various official institutions. With preferential interest rates to which can be added subsidies which are applied to the reduction of the pending capital.
Finance the purchase of premises and property leasing: for the acquisition of the business premises.
Creditpolicy : to finance stock and temporary income lag (income and spending). Payment of interest for the amount used.
Services for the management of the business
Accounts : to channel the daily business operations.
Guarantees and bonds: to guarantee the payment of merchandise to the franchisor, the rent of the premises, etc.
Insurance : to insure the business from all risks that you consider priorities. With maximum range of cover, both container
(premises) as well as contents (fire, breakage of glass and signs,
catastrophic risk, flooding and damage due to water, vandalism,
robbery and pillaging, civil liability, loss of profits, breakdown of machinery, etc.) and flexibility on choosing them. Complementary services: agency, comprehensive damage management, etc.
Home banking : for carrying out banking operations in real time and access to the whole range of services of SabadellAtlántico, at any time and without the need to travel, with complete safety and confidentiality.
Invoicing of cards and telepago 4B.
Tax payment (social security, autónomos, etc.)
Bills , transfers ,salary payment , etc.