COSTS OF SETTING UP A FRANCHISING
How much does it cost to start a
franchising ?
The costs of developing a franchise network are influenced by the ambition of the franchisor, which is why they can vary by so much. That said, an outlet wishing to “put on franchise muscle” must consider an initial investment budget in a range of 7 to 10 thousand euros.
This first investment is conditioned by the quality of the company’s brand identity: if the company is already well structured, the investment figure may be lower than 10 thousand euros. This first investment is used to create the business plan, the legal package (contract, operations manual and brand manual) and all those preliminary technical activities necessary to perfect the legal requirements and the best feasibility of the project.
This initial investment must then be accompanied by another one, mainly in marketing, to activate campaigns to attract potential affiliates. For this activity, the minimum total budget to be considered is around 6-7 thousand euros per semester.
Obviously, the more ambitious the affiliate goals are, the greater the budget to invest in tangetized digital marketing actions. However, I believe that in the start-up phase the first year you should not do more than 3 or 4 affiliations. So as to test the franchisee management system.
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Is it true that to start a franchising network you need to have a brand in the market for at least three years?
No, it doesn't. Even one year of operation is sufficient, as long as the model works well and has a solid base.
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How can I improve my membership proposition?
In addition to your enthusiasm and skill as a negotiator, what convinces an entrepreneur to affiliate with your network is strength in numbers. For this you will need to be able to guarantee an operating margin of 20 to 30 percent. If you succeed, you've hit the jackpot and you'll have extraordinary leverage to exploit: you can, in fact, ask your potential affiliate what other investment can guarantee him such high returns.
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How can I develop a performing franchise model?
Only by increasing customer loyalty, with ad hoc strategies, can a franchise consolidate in the market and grow sales. There are three main activities on which a strategy to increase consumer trust can be based:
- Staff training;
- loyalty programs;
- smart merchandise display at the point of sale.
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