What is a franchise and how to set it up step by step
Posted: Mon Jan 06, 2025 5:45 am
Starting a franchise is an underworld of entrepreneurship. A model that works under its own rules and that, at first, can scare those who are thinking of setting up a business, because of how it operates on a large scale. But don't be scared and keep reading, because here we are going to explain the keys to starting a franchise and succeeding .
Because, at the end of the day, there is a whole set of concepts that have to function as a base, as foundations on which to build a franchise business. These are concepts that are either there from the beginning or there will be no one to get the business up and running. Not even the best ERP program .
So let's start at the beginning. What exactly is a franchise?
What is a franchise?
A franchise is a commercial agreement france number data between two parties in which one (the franchisor) grants the other (the franchisee) the rights to exploit a brand, product or service.
Types of franchise
Franchises can be classified in a number of ways. Each of these classifications determines the various types of franchise .
Types of franchise according to the activity
Commercial : based on the transfer of all elements of a business (marketing, business model, agreements with suppliers, etc.) for its commercial exploitation.
Production franchise : in this modality, the central office is responsible for manufacturing products and an agreement is reached with the franchises for their sale.
Industrial : In this other type of franchise, in addition to the business model, the franchisee is also knowledgeable and can use the process with which the product is manufactured.
Types of franchise according to the commercial relationship
Shareholding or partnership franchise : one of the parties participates in the shareholding of another, having the power to make decisions and share in the profits.
Master . This would be the franchise that gives others the right to exploit the model in a country, so that they can, in turn, expand the type of business with more national franchisees.
Regional . This is how each of the franchises that are the extension of the parent company in a certain region would be known.
Multiple . This occurs when a legal entity owns several franchises of a brand.
Types of franchise according to the place of sale
Online franchises . They mainly use online sales channels to generate business.
Corner franchise . Sales are made under the franchise model within another establishment whose business is related.
In- store . When it is inside a business but in a clearly differentiated space. In this case, it is most common that there is no relationship between both activities.
Automate your entire business in one place
You just have to give your approval.
Find out
How does a franchise work?
The basis of any franchise is the agreement between a franchisor (i.e. the person who grants the franchise license) and a franchisee (the person who makes an investment in the franchise) . This means that, from the outset, we are faced with the complete opposite of an independent business.
In other words, if you are wondering how a franchise works, here is the direct answer: the franchisee buys an opportunity to build a business following the (presumably successful) methods of the franchisor . In this regard, in fact, there is usually an Operations Manual in which all these methods are detailed in a completely exhaustive way.
The existence of this manual means that, when setting up a franchise, the quality of all franchisees is homogeneous. It also makes it possible for the franchisee not to have to work on a strategic plan, because this will already be fully provided for him.
If you want a secure business and you can't come up with a totally original and disruptive idea, this is probably the type of infrastructure you can adhere to with the greatest guarantees. Knowing, of course, that you will have to answer to a franchisor.
Advantages and disadvantages of having a franchise
The main advantage is that it is a proven model , which increases the chances of success. It also allows access to better prices , by having greater negotiating power with suppliers , since several establishments are going to buy the same product for their stores.
Other advantages include access to training related to the business field, which is usually provided by the franchisee. The franchise also benefits from an already established brand image , which reduces the costs of promoting a business, which are usually particularly important when starting an activity.
The main disadvantage is the franchise fee . The transfer of all marketing rights for the product or service significantly increases the cost of starting a business.
On the other hand, the lack of flexibility given to franchises to manage their own business can also be a disadvantage . The headquarters understands that there are a series of basic rules that have led to its success as a company.
Because, at the end of the day, there is a whole set of concepts that have to function as a base, as foundations on which to build a franchise business. These are concepts that are either there from the beginning or there will be no one to get the business up and running. Not even the best ERP program .
So let's start at the beginning. What exactly is a franchise?
What is a franchise?
A franchise is a commercial agreement france number data between two parties in which one (the franchisor) grants the other (the franchisee) the rights to exploit a brand, product or service.
Types of franchise
Franchises can be classified in a number of ways. Each of these classifications determines the various types of franchise .
Types of franchise according to the activity
Commercial : based on the transfer of all elements of a business (marketing, business model, agreements with suppliers, etc.) for its commercial exploitation.
Production franchise : in this modality, the central office is responsible for manufacturing products and an agreement is reached with the franchises for their sale.
Industrial : In this other type of franchise, in addition to the business model, the franchisee is also knowledgeable and can use the process with which the product is manufactured.
Types of franchise according to the commercial relationship
Shareholding or partnership franchise : one of the parties participates in the shareholding of another, having the power to make decisions and share in the profits.
Master . This would be the franchise that gives others the right to exploit the model in a country, so that they can, in turn, expand the type of business with more national franchisees.
Regional . This is how each of the franchises that are the extension of the parent company in a certain region would be known.
Multiple . This occurs when a legal entity owns several franchises of a brand.
Types of franchise according to the place of sale
Online franchises . They mainly use online sales channels to generate business.
Corner franchise . Sales are made under the franchise model within another establishment whose business is related.
In- store . When it is inside a business but in a clearly differentiated space. In this case, it is most common that there is no relationship between both activities.
Automate your entire business in one place
You just have to give your approval.
Find out
How does a franchise work?
The basis of any franchise is the agreement between a franchisor (i.e. the person who grants the franchise license) and a franchisee (the person who makes an investment in the franchise) . This means that, from the outset, we are faced with the complete opposite of an independent business.
In other words, if you are wondering how a franchise works, here is the direct answer: the franchisee buys an opportunity to build a business following the (presumably successful) methods of the franchisor . In this regard, in fact, there is usually an Operations Manual in which all these methods are detailed in a completely exhaustive way.
The existence of this manual means that, when setting up a franchise, the quality of all franchisees is homogeneous. It also makes it possible for the franchisee not to have to work on a strategic plan, because this will already be fully provided for him.
If you want a secure business and you can't come up with a totally original and disruptive idea, this is probably the type of infrastructure you can adhere to with the greatest guarantees. Knowing, of course, that you will have to answer to a franchisor.
Advantages and disadvantages of having a franchise
The main advantage is that it is a proven model , which increases the chances of success. It also allows access to better prices , by having greater negotiating power with suppliers , since several establishments are going to buy the same product for their stores.
Other advantages include access to training related to the business field, which is usually provided by the franchisee. The franchise also benefits from an already established brand image , which reduces the costs of promoting a business, which are usually particularly important when starting an activity.
The main disadvantage is the franchise fee . The transfer of all marketing rights for the product or service significantly increases the cost of starting a business.
On the other hand, the lack of flexibility given to franchises to manage their own business can also be a disadvantage . The headquarters understands that there are a series of basic rules that have led to its success as a company.