Franchise Success: Confidence, Contracts, and Financial Insights

Building Franchise Confidence

Aspects to offer confidence over a particular franchise include acting in a specific area with dedicated centers, maintaining agreements with financial institutions to facilitate franchisee financing, and ensuring high franchisee satisfaction within the network.

Pre-Contract of Franchise Explained

As its name indicates, a pre-contract of franchise precedes the preliminary contract. It is a written document where the franchisor agrees to reserve, for a specific enterprise, the right to access the franchise in a particular area for a limited time, usually around two months.

Franchise Statements: True or False

• Both franchisor and franchisee are independent: True
• There is no specific Spanish law regulating franchises: True

Funding Sources for Franchisees

Franchisees can approach several funding sources:

• Grants and subsidies: Franchises can benefit from business creation aid.
• Banks, savings banks, and other credit institutions.

Disadvantages for the Franchisor

• Lose exclusivity over operation and management procedures.
• Franchisee selection mistakes can reflect poorly on the franchisor's image.
• Restricted product distribution possibilities compared to non-franchise models.

Rights of the Franchisor

• Receive receivables on time as agreed upon for all set fees.
• Receive information on sales volume and other agreed-upon aspects.
• Denounce and terminate the contract in case of franchisee default.
• Develop actions and campaigns for the franchise's evolution.

Franchise Concept

A franchise is a contract where a franchisor grants a franchisee the right to operate a system of marketing certain products or services in exchange for financial consideration.

Advice for Franchisees

• Study and understand the advantages and disadvantages of the franchise model.
• Decide in which sector to invest based on personal interests.
• Inquire about the franchisor's operational history and the number of open establishments.
• Assess whether all franchise requirements are acceptable.

Economic Tradeoffs for the Franchisee

• Entry fee: The initial amount paid by the franchisee.
• Sales Canon (Royalty fee): A periodic payment made by the franchisee.
• Advertising fee: A contribution paid by all franchisees within the network.

Franchisee's Rights

• Receive the product or service and know-how.
• Be assured of exclusive business exploitation in a geographic area.
• Receive sufficient support in promotion, advertising, technology, counseling, and financial matters.
• Benefit from the franchisor's advertising campaigns.