The benefits include self-employment and the guarantee of investment in a company with proven success, but you must have clear accounts to take advantage of it

When it comes to investing in franchises, there are various risks and uses. Some benefits include self-employment and the guarantee of investing in a company with proven success. However, the biggest risk is buying a franchise that turns out to be a fraud. Here, we explain how to avoid this and other risks for your franchise to be successful.

Leer en español: ¿Quiere invertir en franquicias? 3 claves para hacerlo exitosamente

According to Luis Felipe Jaramillo de Colfranquicias, the main thing to keep in mind when investing in franchises is "[1] determine the characteristics as an entrepreneur, [2] management and administration skills, and [3] the current financial situation." To which we must add a fourth step: find out about the company.

1. Learn and plan before investing

According to the magazine Entrepeneur, for the first step it is essential to be willing to follow the rules of operation indicated by the franchisor and to maintain the confidentiality of the information. Additionally, the magazine indicates that before investing in franchises it is pertinent to ask the following questions:

• "How much money do I have?
• Where do I want to establish the franchise?
• How much time do I plan to devote to your operation?
• What are my expectations regarding monthly profits and return on investment?
• What level of risk am I willing to assume?"

It is vital to ensure a full-time interest in the franchise, know how to delegate and choose the right personnel who can be trusted and have no legal impediment to the work.

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In addition, it is necessary to learn about how the knowledge necessary for the optimal management of the franchise will be transmitted. The publication Personal Finance assures that "it is necessary to inquire about the way in which this knowledge will be transmitted and to demand its adequate transmission, it is important to define who will assume the costs and how many people will be trained and for how long."

2. Having clear finances

For the second point, management and administration, it is essential to ask at the outset everything related to the costs and benefits of the franchise "is vitally important that the franchisor can give that answer clearly and properly substantiated," says Personal Finance. For this, it may be necessary to hire a financial advisor.

Another important point, if it is a foreign company, is to inquire beforehand about the costs of the right to enter the country and the royalties, since these are usually high. One must also know if the right of entry guarantees the exclusivity of the territory and if it gives the right to sub-franchise.

In addition, one must be careful when choosing the premises in a safe and crowded place. You must have a good lease, because according visafranchise.com "an important reason why many retail stores fail is because the company has a high fixed income, in relation to income, which must be paid monthly, regardless of sales of the month".

3. Having economic strength is key to a long-term franchise

Regarding the third point, Jaramillo points out that "the investor must have a risk capital so that his economic situation is not affected, which in many cases may be essential for the franchise project to mature in the long term." In addition, according to the newspaper La República, for the Colombian case, it is pertinent to know that "on average banks lend for a commercial credit with a rate of 13.26% month expired. Citibank, for example, is one of the financial entities with the lowest rate since it only charges 9.2% interest, while BBVA Colombia has a rate of 15.4%. "

Finally, one of the most important steps for a successful franchise is to learn about the franchisor. According to Personal Finance, it is crucial to request the certificate of existence and representation of the franchisor company. Also verify that the brand is properly registered; in Colombia, the only document that accredits this is the certificate of registration with the Superintendence of Industry and Commerce.

Portafolio also recommends "analyzing the fundamentals of a business in which we want to invest and establishing if it is competitive in a given market, if it has a growing demand for the products and services it offers, and if there are others interested in being part of its networks. establishments, which may be indicative of the performance of the franchise".

LatinAmerican Post | Sofía Carreño
Translated from “¿Quiere invertir en franquicias? Le damos 3 claves para hacerlo exitosamente”