The franchise business model is increasingly successful in Colombia. Companies like Subway are positioning themselves in the country with great projections for the future. According to figures published in the media, the American sandwich giant plans to have 500 stores nationwide by 2017. In this article, you will learn the necessary steps to create a franchise in Colombia, as well as what you should take into account when investing your time and money without giving up.
Part 1 of 4: Know the Basic Features of the Franchise System
Step 1. Find out about what a franchise is and if it is the model you are looking for to expand your business
You need to make sure if this business structure will help you transcend the market with the brand for which you have worked tirelessly. First of all, you should know what a franchise really is and know in detail the aspects necessary to establish one in the market. It is also important to determine if it is what to look for in order to expand your business according to the specific criteria that you have previously established.
- According to the RAE (Royal Academy of Language), a franchise is understood to be the granting of rights that is given to a person or company to commercially exploit a product or activity in a specific area or region.
- The franchisor, in this case you, is an entrepreneur and entrepreneur who has managed to succeed in the industry with a brand, an image, the development of a specific technology or a trade name, and who wants to expand through this model.
- If you represent an international company, get advice on Colombian legislation regarding the basic aspects of contracting and franchising.
Step 2. Find out about the advantages and disadvantages of franchising your business
It is important that you consult on the legal and commercial aspects in order to define if the characteristics of your business are convenient, or rather, if your company is ready to become a franchise. In this way, you can be prepared for the various setbacks that may arise in the process of converting your business into a franchise.
- Determine if your brand is recognized in the industry to which you belong, if it is legally protected and if you have the Know How (know-how) developed and implemented. These are questions that you must answer to know if your company is eligible to become a franchise.
- When converting your business into a franchise, you must prepare to provide your franchisee with the necessary tools to reproduce your concept. This includes all the transfer of technical, operational and image knowledge so that your brand or product maintains the quality standards with which it has achieved success.
- In this model, the advantages are several for the franchisor, starting because you will not be the one who will provide the capital and labor to open the franchise. You will not have extra personnel or development costs, in addition to the fact that the expansion of your business can happen very quickly.
- Unfortunately, the downside is that you should bear in mind that, when closing the deal, control of the market in each agreed location will be in the hands of the franchisee. That implies that you will have to make an effort to maintain a supervision of their management and have a continuous advisory plan so that the essence of your brand does not fade.
Part 2 of 4: Prepare Documentation and Response Plan
Step 1. Begin to gather the necessary documents for your franchisee, in addition to creating a strategic response and advice plan
Although the franchisee is the one who will invest the economic capital to open the franchise of your business, your responsibility as a franchisor is to generate efficient communication mechanisms and flows so that the process is quick and with the least possible obstacles.
- Investors who are interested in your brand or business will be very attentive to validate the transparency of the information you provide them. The success of the agreement depends on your organization and attention to detail.
- Organize a folder and presentation that includes the basic data of your company such as name or company name, main address, information on the incorporation of the brand, social capital, partners and date of incorporation.
- It provides a detailed description of the company so that the franchisee can clearly see the business objective, the brand's philosophy and the bylaws they have established as an organization.
- Specify the characteristics of the franchise that you offer in terms of products, services, exclusivity, royalties, requirements that you demand in infrastructure and, in general, everything related to the management of your brand.
- If you are not a beginner on the subject, you should have ready the structure of your franchise network and how they have been established over time, in addition to the financial results they have obtained. If it is your first time with the model, it is likely that franchisees want to see your financial statements to know the solvency and stability of your business.
Step 2. Build an internal team or hire a firm specializing in franchise issues
The term paperwork is very Colombian and refers to the fact that sometimes legal and "office" matters can take longer than normal. This includes emails, calls, signatures, document authentications, and so on. It can be too much information, so you will need to have a team within your company that takes care of those little details. There are also specialized firms that offer advice throughout the process, saving you time and extra work.
- Consulting companies can be very effective in understanding the legal environment in which you are going to move once you create a franchise.
- In addition to legal services, this type of company also offers advice on marketing, communications and management support.
- Having an advisory will also allow you to adequately evaluate your potential franchisees so that you leave your brand in the best hands, and avoid financial and commercial image risks.
Part 3 of 4: Establish the Colombian legal framework and the franchise agreement
Step 1. Draft with the franchisee and, with the help of a commercial lawyer, the contract to start the franchise
Unlike what can happen in other countries, in Colombia franchise contracts do not have a specific regulation, but they conform to what is legally known as the Principle of autonomy of private will. Generally speaking, this means that both the franchisor and the franchisee negotiate a series of rights and duties in a free manner with the benefit of mutual trust.
- It is important to draw up a contract that is adjusted to the type of business and that is executed with the freedom that the Colombian legal framework allows in terms of capacity, consent, cause, good faith and mutual benefit.
- Although there are no pre-established conditions, the contract must be written and apostilled in a public notary so that what is agreed between the parties becomes law, establishing responsibilities in its execution.
- If it is an investor or an international brand, basic aspects must be taken into account to validate the contract at the territorial level. In Colombia, a written, apostilled contract that clearly defines the applicable jurisdiction of the franchise is recommended.
Step 2. Find out about the regulatory entities of commercial companies in Colombia
Franchisees are generally legally established as commercial companies. You must bear in mind that the entity in charge of inspection, surveillance and control in this case is the Superintendency of Companies.
- The Commercial Code establishes duties for merchants such as registering in the Colombian commercial registry, registering this in all acts and documents required by law, keeping regular accounting, and refraining from executing acts of unfair competition, among others.
- You can also consult the technical standard established by the Colombian Institute of Technical Standards and Certification (ICONTEC), which will help you validate the general requirements for the contractual process of your franchise.
Part 4 of 4: Strengthen the relationship with the franchisor and expand the network
Step 1. Execute the schedule established in the negotiation and that should have been registered in the franchise agreement
After signing, your brand and business will open up to the market and new horizons. Your responsibility and that of the franchisee will be to ensure that the commitments acquired are fulfilled, benefiting both parties.
Remember that confidentiality is key to the success of the franchise, especially regarding the transfer of knowledge and technology
Step 2. Document the training process to obtain a good practice manual as a result
This will let you know what to do and what you will definitely not include in your next franchise agreement. In addition, it will allow you to validate the scope of your company and to evaluate your franchisees in a more thorough way.
With the good practices manual, you can have a useful tool that will help you improve business performance both in the short and long term. In this way, you will guarantee the success of the franchise
Step 3. Learn from the experience and expand your network
Ready! You did it. You are risky and you had the will to open your business to new opportunities. Now you only have to optimize your processes so that you can expand your network of franchisees and make your brand maintain the success that those investors wanted to bet on.
- The Colombian Chamber of Franchises brings together the franchise union in the country and has produced a code of ethics that can help to improve the relationship between the franchisor and the franchisee in addition to achieving better and better results. You can consult the document in the following link.
- The first franchise network established in Colombia was Burger King (1980), a business practice that shows accelerated growth, which placed Colombia in fourth place in the ranking of franchises in Latin America.