Acquiring a Franchise in Mexico
If one intends to become independent and be their boss – and they’re at the crossroads of not knowing whether to acquire a franchise or start their own business – then franchising is for those who need support. Both options have pros and cons. The risk of failure is reduced by acquiring a franchise, but a franchisee has to meet basic brand guidelines.
According to INEGI Economic Demography research, 70% of new businesses will have failed after 5 years, 78% will have failed after 10 years, and after 20 years, only 11% of those businesses survive. And several factors influence business success, the main being the business plan.
Even when one has enough capital to start their own company, creating a business plan must be considered because the same study says that the main cause of the closure of new companies is business incapacity. The main difference between a franchise and one’s own business is that a franchise is an already proven business model; it already worked and operates under an already established scheme. On the other hand, a business started from scratch operates under a trial and error scheme.
- Reduction of Investment Risk: A franchisee does not start from scratch; they begin working from an already established business and recognized brand.
- Continuous Innovation: The franchisor has a specialized marketing team for product innovation, creation, and presentation; the franchisee only has to follow the established guidelines.
- Assistance: To preserve the brand’s reputation, franchisors provide service to their franchisees in the face of any problem that may arise.
- Training: By acquiring a franchise, one receives knowledge through training from the franchisor.
- The parent company performs promotion and Advertising.
Starting a Business from Scratch
- High risk of losing investment.
- Lack of existing resources and a strong business plan.
Before making a decision, the entrepreneur has to analyze his economic situation and short, mid, and long-term goals & objectives. Also, the brand provides support and guarantees to its franchisees.
The figures indicate that 90% of the world’s franchise-model companies survive and succeed. On the other hand, less than 30% of conventional new businesses survive, and only 10% are successful.
There are national and international franchises worldwide, providing investment opportunities backed by experience and documented systems & processes.
To better understand the concept, a franchise is an agreement where the parent company (the franchisor) grants a license to another merchant (the franchisee) to operate a business that utilizes and replicates the franchisor’s business model, brand, products, and services independently in a given territory with consistent commercial and administrative methods.
Especially with the history of the past two years, one option is to acquire a franchise in health services such as medical laboratories, hospitals, clinics, and diagnostic centers. Listed below are different points that will help make a bold decision regarding franchising investment.
What are the advantages for the franchisee?
- Reduction of risks and uncertainties by investing in an already proven business
- Continuous innovation in methodology and technology
- Training documented in Operating Manuals.
- Access to administrative control systems and performance evaluation.
- Training in production processes of goods and services
- Working with a consolidated network of franchisees
- Access to the promotion and advertising programs
- Increase in personal prestige through involvement with an already successful business model
What are the critical success factors in a franchise business?
- Financial capacity
- Brand strength and recognition
- Excellent product or service
- Commercial ability
- All the research has been done upfront
- An ideal geographical location
- Understanding and embracing the franchise model
The Seven Deadly Sins of Franchising
- Neglecting the basic expectation of business success and customer service
- Choosing franchisees incorrectly
- Not having a training plan
- Not having an Operating Manual
- Not providing support
- Not adapting to the local market
- Poor financial performance evaluation
What characteristics should a franchisor look for in a franchisee?
- 120% commitment
- The franchisee makes decisions proactively within the established limits
- The franchisee acts as the “eyes and ears” of the customer – they listen to customers’ feedback & needs and adjust their next steps accordingly
- Compliance with brand guidelines
- Be open to change
- Be disciplined and respect the conditions of the franchise.
What are the characteristics of a good franchise?
- Provides support to franchisees
- The business is organized and prepared for franchising, so the franchisee can fully receive the parent company’s know-how.
- Builds brand for more recognition and greater positioning
- Continuous innovation and development
- Always gives support and direction to franchisees