Buying a franchise of a famous brand seems attractive to many entrepreneurs. However, in order to become a franchisee, it is not enough at all to have the necessary amount of money in the account and a good room in mind. Franchisors present a number of not always obvious requirements to their junior partners. What - say specialists at StartUp, which acts as an intermediary and consultant in franchising.
The Russian franchise market continues to delight in the pace of its development. Summing up the 2012 year, it is easy to see the positive dynamics in the development of the largest retailers. Milana launched its franchise program only two years ago, and the year 2012 was marked by 4 new stores for it, which exceeds the performance of the previous year. The EVITA franchise network has opened 8 new stores, which is 1,5 times more than the previous year. Thomas Munz chain launched last year 18 own and franchised stores, Mascotte also exceeded last year's performance and opened an 21 showroom. Zenden chain launched 54 new stores, which also improved territorial development indicators, and the CenterObuv trading house opened 176 new stores, due to which the total number of stores in the network already exceeds 1000.
Achieving such results is not a simple task for franchisors, as it seems at first glance. The number of franchise networks in the Russian market is growing every year, competition is increasing, and in order to attract the attention of potential franchisees to their franchise, franchisors are forced to promote it through advertising on the Internet on various sites and business portals, as well as actively position the franchise system on the official site.
But this is only the beginning of the selection of a candidate for entry into the concession, and not every investor who applies can get the desired franchise. Any brand owner for all the time of his work, and not just at the stage of launching a franchise program, creates and changes several times the portrait of a desired partner, and, in proportion to the growth of the network, the requirements change, which are becoming increasingly difficult to meet. Despite the rapid increase in the number of franchisors, the demand for a franchise in Russia has not subsided over the last 10 years, and this gives reason to think: how high is the conversion of customers who have turned into franchise buyers and to which entrepreneurs brand owners are willing to sell their franchises?
Money can not buy happiness
The wording “Do you fit the role of a franchisee?” Often contradicts the mindset of an investor who considers himself suitable simply because he is ready to buy and has the means to buy. But meeting the criteria outlined in the franchise offer and boiling down to the availability of premises and a certain amount of investment is the minimum requirement. It only gives you the opportunity to act as a candidate for the purchase of a franchise in your region, but does not guarantee its receipt. Marketers and a number of franchisors have created the myth that franchising is a form of business in which the franchisor is required to create a turnkey subsidiary in return for a lump-sum fee and royalties paid by the investor. And this is the biggest misconception that franchisors, consultants, brokers, and entrepreneurs themselves should deal with.
According to 70 statistics,% of newly created companies cease their activity during the first year of their existence. And the reason for this impressive figure is the lack of entrepreneurial talent or experience among creators and managers. Work on franchising minimizes the risks of creating a new enterprise, but does not exclude them in any way, so when selling a franchise, franchisors always choose partners who are ready not only to fully surrender to their business, but also often lead a lifestyle that matches the style of the brand. However, even this is not always enough to obtain franchisee status.
Who Franchisors Don't Like
The presence of the necessary investments and relevant premises is the minimum with which you should begin to negotiate with the franchisor. According to a survey conducted by StartUp agency, of all customers who apply for a franchise purchase, only 32% meet the requirements of the franchisor in terms of necessary resources, and only 8% of 100 sign the contract. These 8% of partners are entrepreneurs whose expectations this franchise fully meets, and those who, in turn, meet all the requirements of the parent company. In general, it can be said that the statistics presented are negative, and in many respects they are formed by investors, for whom a request for a franchise is more a chance to consult specialists than an opportunity to represent a coveted brand in their city. Needless to say, franchisors do not like these.
Also, franchisors do not want to contact lovers to bargain for the conditions. For example, the CenterObuv company expressly declares in its franchise offer that the area of the store premises should be at least 250 sq. m and franchising department will not consider premises with a smaller quadrature. Therefore, you should not assume that the information on the site about the minimum requirements for a particular indicator is discussed. The brand owner is unlikely to lower his minimum requirements for a guaranteed franchise sale. He is more likely to find another potential franchisee that will fully comply with the requirements of the company.
One of the most important factors when choosing a partner is brand franchisor loyalty. Loyalty is not only a positive opinion about the brand or the product itself, but also the possession of publicly available information about the company. Most investors who want to open their shoe and accessories store rely only on their own taste or knowledge, without first studying the franchisor’s development plans. This ignorance reduces their chances of obtaining a franchise. For example, in an open franchise offer of CORSOCOMO, it is stated that it provides an exclusive city permit for each of its franchisees. Despite this, investors from cities that already have franchised brand stores are often contacted by the company. Such investors make a bad impression: not knowing the information available on the company's official website and in other public sources indicates the unpreparedness for communication and the disinterest of a potential partner. All this can serve as a bad service in his further negotiations with the management company.
Experienced and able to obey
According to StartUp, the key factor for buying a franchise in Russia is brand recognition (39%). The next most significant ones are: an established work system and a ready-made supply chain (24%), high potential profitability (18%) and active advertising support (6%). “Lack of business experience” as the reason for buying a franchise was indicated only by 9% of investors surveyed.
However, it is business experience that is one of the key requirements that can be found in every franchised offer. It is a mistake to believe that franchising was created for beginning entrepreneurs with the goal of training and developing them “under the wing” of a large company, because franchising is not a safe platform for starting a business and testing your own talents.
One of the main indicators of the franchisor’s quality work during the year is the ratio of open enterprises to closures. More than one major retailer will not want to spoil their statistics with the closure of franchised stores due to poor store management and other mistakes made by inexperienced entrepreneurs. No matter how interested the franchisor is in regional development, he will not neglect the initial careful selection of candidates for accession to the concession. Selling a franchise to entrepreneurs without experience in business and franchising is a time bomb, which can subsequently cause irreparable damage to the brand.
Although, of course, not all companies consider the entrepreneurial experience of a partner to be the most important criterion. The Tervolina company, for example, considers the business experience of a potential investor to be of secondary quality and the main requirement for a potential partner is brand loyalty and willingness to comply with the standards adopted by the company. Franchising is based on partnership, and each of the parties should be interested in high-quality joint work. Creativity is inappropriate here, work is standardized to the limit. And the more famous the company, the more requirements and regulations will have to be followed by a junior partner.
That is why some franchisors are wary of very experienced entrepreneurs: “seasoned” businessmen do not know how to obey. This is especially noticeable on the example of international companies, some of which consider Russian entrepreneurs not able to follow corporate rules. With great care, they choose their partners in Russia, considering the Russian market one of the most difficult due to the lack of legal regulation and the special mentality of Russian entrepreneurs. The fears of some international brands about the rebellious spirit of Russian businessmen are often quite justified. Many Russian entrepreneurs are hardly ready to obey the standards of the franchisor, acting according to their rules and experience, believing that this is the only right way. This behavior can sometimes lead to the closure of the enterprise.
Nevertheless, between the fatal lack of experience and excessive sophistication in business, there is a compromise with which both the Russian and foreign brand owners agree. These are entrepreneurs who successfully operate a franchise at the time of applying for the purchase of another franchise with a view to further development. They have the most relevant and proven experience, which will not leave indifferent any franchisor.
According to the StartUp agency, among the investors who applied for a franchise purchase, women predominate (57%), while men are significantly inferior (43%). Examining a sample of existing franchisees, you can see that the real portrait of a potential franchisee is actually more female than male: among entrepreneurs who bought a franchise, 61% are women, and only 39% are men. If we compare the data on initial requests with the final statistics, it becomes clear that it is women who are better suited for the role of the ideal candidate in the eyes of franchisors and are more successful in this kind of “competition”.
So what should an ideal franchisee be like? The vision of Russian and international companies is significantly different, not to mention how individual the portraits of the franchisee are in the concepts of franchised retailer packages. But still, with the help of statistics, it is easy to draw a portrait of the entrepreneur who could satisfy the needs of even the most sophisticated franchisors.
An ideal franchisee must have proven experience in conducting a franchise business and own a franchise company at the moment - exit from the concession, regardless of the reasons, is completely unacceptable in the resume of a potential investor. If the franchisee develops a local network, working exclusively on the territory imputed to it, and the increase in turnover, as well as the number of objects to be opened, correspond to the development plans of the brand owner or even anticipate them, loyalty from the new franchisor is ensured. The ability to obey and fulfill the requirements and regulations of the franchisor, which means compliance with a certain psychotype is an important property that an entrepreneur must be endowed with, and successful business experience as a franchisee guarantees this compliance. Also, the investor must be aware of the activities and products of the company, with which he claims to cooperate. Finally, loyalty to everything related to the brand’s activities is a must. Franchisors expect respect from their junior partners for their product, for the parent company and for the entire structure as a whole, as this ensures that franchisees will share corporate values and ideas of the company, including maintaining an appropriate lifestyle.
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