The first steps in franchising
Room rental
There is a golden rule – if there is no suitable premises at the time of starting a business, then it is better not to open anything at all than to open anyhow, in the hope that in the future it will be possible to change the location / make repairs / traffic will increase / the metro will be built. It is better to wait, give yourself time to monitor the market.
And if you have no business experience, then it is better to choose the area in which you do not need a lease to make your debut in franchising, since this section of expenses is akin to a loan - you will pay regardless of whether you earn or not.
The room is not searched for in one day or week, it takes time to search for it, you need to constantly monitor special Internet sites and view all new ads every day, call everyone and give this process a sufficient amount of your time and attention. It is better to take from one to three months to search. During this time, it is quite possible to collect enough information, study the market, understand what you can save on, how to look for customers, etc.
As for the office, its location plays a significant role only for those who are trying to throw dust in their eyes. Of course, it is important that it is convenient for customers. But at the same time, it is far from necessary that the office is located on the so-called "red line" and the client immediately stumbles upon the sign with his eyes. We just need convenient landmarks to search for. Moreover, this statement often applies not only to offices, but also to retail outlets, especially if the offered product or service has some outstanding qualities or an attractive price. Moreover, many consumers familiar with pricing have already developed a reflex to avoid all kinds of establishments in too passable places. They know that the areas there are much more expensive, and therefore the prices are almost always higher.
No need to rent an office with a large area. After all, by and large, there shouldn't be many employees in your first franchise – they also need to pay a salary, regardless of how you are doing with sales. Ideally, at first you should have one employee at all - a talented salesperson (for services or goods, it doesn't matter). He can be paid a small salary, but at the same time put on a good percentage of sales. This will be a good motivation for him to treat work as his own business.
The right franchisor is always interested in where you are going to run your business. Most concessions provide for the mandatory approval of the place of business (premises) by the contract. In other words, you will be able to work under the franchise only in the place where the copyright holder allows. This is due to several points: a) the franchisor wants to be sure that his brand will be presented, if not in an image place, then at least in a place where his image will not suffer; b) the franchisor wants to understand that this place will provide you with the necessary influx of customers for a profitable business; c) the franchisor wants to be sure that you will not close your business due to an unfair lease agreement or for reasons of technical non-compliance of the premises with business requirements, for example, there is no ventilation, fire safety rules are not observed, etc.; d) other reasons why the rightholder, according to his experience and the specifics of the business, considers the place unsuitable.
Sometimes exactly the opposite happens – the franchisor allows you to open a business almost anywhere. This is very bad and means that he is least interested in your subsequent success - the main thing for him is that you buy a franchise. Signs of this are a relatively high initial payment and low royalties in the future (or no royalties at all).
There are also such strategies for the development of franchise networks, when the franchisor excessively carefully chooses a place, "as for himself"... and often it turns out that he chose the place for himself. In such cases, the copyright holder uses franchisees as scouts in new markets: sells the franchise to a city where his company is not yet represented, enters into a concession agreement for two years and after this time, if the city and place show good sales, the contract does not extend, stands next to the store of the same name, and the franchisee is forced to wind down his business.
Lump sum payment: to pay or not to pay?
The lump-sum fee is an initial and one-time payment for joining the franchisor's business. It's no secret to anyone. This payment is justified by the costs of the franchisor to start working with a new franchisee. These costs include staff training, miscalculations, analysis, etc. In some firms, a lump-sum contribution goes to advertising and promotional products. But many modern companies consider a lump-sum contribution simply as their profit, payment for providing their brand or idea for use.
In recent years, in the community of Russian franchisees (especially during the crisis) there is an opinion that there is no one to pay the lump-sum fee and there is nothing for it, except for giants like McDonald's. This position is explained by the fact that there are very few companies that have proven their long-term stability in the Russian market. Many franchisees even go so far as to completely lose interest in the franchisor's offer when it comes to the "pausalka".
Ideally, the lump sum and royalties should be included in the wholesale price of the products. For companies engaged in manufacturing, having 50 partner stores under their own banner is a stable, planned, regulated income. Therefore, such companies do not need separately prescribed payments, since they will receive this money from the sale of products to their partners anyway.
You can talk for a long time about the advantages and disadvantages of buying a ready-made business, complain about unscrupulous franchisors or unjustifiably low demand. But in order to succeed, the main thing to remember first of all is that any business should benefit people! If this is the case in your case, success will come sooner or later.
Svetlana Michan
Photo: Shutterstock.com
