Published in El Economista , 02 - June , 2023 Overview franchises

A frequent mistake is to rush and not do a previous analysis. Know what you should analyze before signing a franchisee contract.

Investing in franchises is usually safer, since they have a proven business model; However, choosing the ideal one is essential to make the business prosper, so it is important to take other variables into account so as not to make mistakes and not lose money.

Daniel Arce, founding partner of Franquicias que Crecen, says that the main mistake is believing that the certainty will be total. "The most common mistake before buying is wanting to have security in everything. That is not going to happen. In business there is never total security, there is risk minimization. Nobody guarantees economic success."

In addition to this, he states that there are two more mistakes that are also key when thinking about investing in a franchise. The first is "don't make the investment."

"Many times people decide, as if it were a sovereign and conscientious decision, not to do anything. But business is there to be done."

The second is to hurry. "Although it sounds contradictory to the first point, it is important to make the investment but going slowly and without pause." "Get to know the owners, the franchisees, do the customer experience, get to know the factory if there is one, look at their networks, take a good look at the contract. And once you have everything, do it," he advises.

Decalogue not to err
The Canudas study compiled, based on his experience, the ten commandments of a franchisee applicant so as not to "screw up".

1. Know what a franchise is: Some people are unaware that in a franchise system they are obliged to respect the guidelines established by the franchisor. They positioned their brand, they have products approved by the public, they were wrong and they corrected. In franchises you can't do what everyone wants.

2. Evaluate the strengths and threats of the areas that franchise: Falling into the error of not analyzing the characteristics, strengths and threats of the activity sectors that franchise is a major oversight. Before choosing a franchise, you have to observe the behavior of each of the items.

3. Choose a field that you like and not because it is fashionable: You have to choose what you like and generate passion, which gives joy when going to work. You cannot choose a franchise only based on its potential profitability, because if there is no motivation, it will not be profitable in the long run. Do not be tempted by business opportunities that become fashionable.

4. Be clear about what you want to achieve: Not all people want to become a franchisee, if you are in doubt, do a self-evaluation and analyze if it is what you really want, set goals and see if having a franchise will help you achieve them.

5. Ask the right questions: The lack of information can cause problems or dissatisfaction. Do not be afraid to question the franchisor.

6. Talk to the current franchisees: They allow to corroborate the veracity of the franchisor's statements.

7. Evaluate the economic and financial behavior in detail: Analyze the investment in detail: costs to enter the point of sale, facilities, initial stock, necessary capital until reaching the break-even point. It also accounts for the projected flow of funds (income and expenses) for at least a period of time until the estimate of the recovery of the invested capital.

8. Don't close a deal on impulse: Some people get excited and end up closing the deal without doing a lot of research.

9. Analyze the commercial location: Choose a commercial premises, if necessary, do it strategically and not only taking into account economic convenience. Generally the location can be the most important aspect for the success of the business.

10. Consult franchise experts: Professionals in the sector help find the best option, advise and guide you in everything you need to know.

These tips will help you make a more defined analysis and choose the best franchise. Remember, the important thing is that you feel comfortable developing the business and that it is an industry that you like.