How Franchises Work
The methods of commercial affiliation can vary depending on the sector and the type of business. Let us explore some examples together to understand better how franchising works.
Industrial: This is a fairly common contract in the restaurant industry, in which the parent company transmits to the affiliate not only the license and the brand but also the production techniques and technologies. In essence, the affiliate identifies itself with a company that produces the goods and distributes them using a network of associates.
Distribution: In this case, in addition to receiving knowledge and commercial techniques from the parent company, in order to sell the products on the market the affiliate will have to pay the parent company a one-off fee, called an entry fee or a periodic fee or royalties.
Services: In this type of contract, we are no longer talking about products but about the marketing of services, as is the case for example in sectors such as travel.
As regards organizational models, it can be divided into:
Direct: This is a type of contract that provides direct entry into a foreign market to one or more local operators interested in establishing their business in a specific country, where the company's brand is well known.
Indirect: This is a type of contract in which the company involves a third partner with capital who assumes the responsibilities and financial risks of the collaboration. This is the case of companies interested in exporting to countries that are very distant from a cultural point of view and with particular difficulties at the distribution level.
In essence, it is therefore a contract that is advantageous for both parties, since on the one hand the franchisor is able to expand its commercial network and increase the brand identity of the brand without personally taking care of the physical management of the various sales points and instead sharing the costs. On the other hand, the affiliate relies on a system already tested on the market, and reduces the risks associated with a new business, even without having consolidated experience in the sector.
But now that we know how franchising works and its advantages, there is one last point to clarify: what are the costs to be borne to open a franchise?
How to open a franchise: the costs to bear
When considering how to open a franchise, it is essential to consider not only the bureaucratic aspects, but also the costs that the affiliate must face. The support offered to the affiliate covers a wide range of aspects: on the one hand, the transfer of skills and goods; on the other, compliance with operational standards and management and production models established by the company.
However, on a practical level it is also important to evaluate the economic aspect and the costs that the affiliate is required to bear in compliance with the contractual rules that govern the relationship. The entry fee guarantees the right to enter the company, therefore it is defined as a commission paid at the time of signing the affiliation contract. Added to this is the payment of a percentage of the turnover that can exist for a certain period of time or, at the discretion of the company, for the entire duration of the partnership. In addition to the initial fee and the share paid on profits, the franchisee may be required to pay a periodic fee that has the value of an advertising contribution for the benefits obtained from the marketing campaigns undertaken by the brand, at a national or local level. In addition to the expenses that the affiliate will have to bear, there are also contributions for the possible use of tools and equipment, or bank guarantees paid to guarantee the goods.
MBE Centers work on agreements negotiated at international level: being part of our franchising system allows you to face the most demanding challenges thanks to effective teamwork and constant commercial and operational support.
MBE franchising offers an affiliate program that provides assistance, training, support and possible financial benefits. By starting your business with MBE, you can be part of a network of about 1600 service centers worldwide and benefit from the success of other entrepreneurs.
