Are you considering opening a restaurant? Are you considering opening a large catena succursale? You’ve arrived to the correct location.
In this article, you will find all of the information that may be useful to you.
In fact, we’ll look at how a franchising contract works in a restaurant and what it may mean for you.
If, on the other hand, you’ve already ruled out franchising but need information on how to open your own restaurant, read on!
WHAT IS FRANCHISING AND HOW DOES IT WORK?
A contract between entrepreneurs is known as franchising or commercial affiliatio.
It enables an entrepreneur to create or sell items under an existing brand while adhering to all of the brand owner’s criteria in exchange for a share of the sales.
Is Everything Clear Now?
Wait; let’s attempt a realistic example to make things simpler.
Consider McDonald’s, the most well-known franchised restaurant brand.
We know what we can eat inside whatever country we visit throughout the world. And the majority of these locations aren’t directly owned by McDonald’s, but rather by independent business owners.
Not all franchise chains are as well-known or have the same distribution as McDonald’s.
There are also a plethora of small local chains that invite you to join them. The cost of joining one or the other, as well as their reputation, changes dramatically.
The Franchise’s History
The first attempts at franchising date back to the Middle Ages.
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Coca-Cola was one of the earliest successful instances in contemporary times.
In 1886, pharmacist John Pemberton gave permission for the first version of his drink to be produced and distributed, and it quickly became one of the most renowned beverages in the world.
With the introduction of American fast food in the 1950s, the boom begins. The two most well-known fast food businesses, McDonald’s and Burger King, were founded between 1954 and 1955.
Both companies made the decision to focus on commercial association right away.
Why are you pondering this? Because, in comparison to traditional development, it allows for significantly faster parent house expansion. The parent firm and the affiliate share a portion of the investment and business risk.
They were able to acquire more in time in practice!
We said that a franchise is a contract, and the basic statute governing commercial affiliate contracts in Italy is n.194 of 2004.
No need to be alarmed; the normative section despises everyone; instead, we see a brief review of the essential points.
All of the parameters that the franchising contract must report to be regarded legal are outlined in statute 194.
Take a closer look at them:
• The affiliate must submit to the mother house the entry price (entrance fee) and percentages on turnover (Royalty) that the affiliate must recognize.
• The affiliate is sold the affiliate’s know-how. That is the collection of non-transferable secret information, tested methods, and non-transferable practices required to carry out the activity in order to preserve the parent company’s quality standards.
• The parent company’s assistance and support services for the affiliate.
• The length of the franchise agreement and any options for renewal.
Advantages of a Franchise
Why would you want to start a franchise? Let’s have a look at the favorable aspects.
It’s a manner of doing business with advantages and disadvantages, and it’s not appropriate for all situations. We strive to figure out what benefits a franchise can provide and in which instances it can be a suitable fit.
The affiliate obtains the right to utilize a pre-existing brand. Instead of beginning from scratch, the new entrepreneur has leveraged the symbol, the format, and the image that the brand has created.
If the brand has a solid reputation, the benefit is huge. The brand and its products are already familiar to potential buyers.
• The working way: when you join the franchise, you’ll be a member of a tried-and-true work approach. Unlike those who start a firm from the ground up, the organization has previously tried items and procedures and discovered the finest techniques.
• Support and training: the main firm gives support and training to each affiliate, which is especially crucial.
• The main firm is vested in the affiliate’s ability to establish a successful sales point. Both for Pars, who will be paid for the length of the deal, and because each point of sale competes with the brand’s growth.
• Supplier report: Many franchise networks have agreements with suppliers for all of their locations. This is done in order to standardize the product’s quality and to be able to achieve better costs. Opening an independent sales point, on the other hand, necessitates the establishment of a trusting connection with suppliers (here we talked about it widely).
• Marketing and advertising: Expenses for marketing and advertising are frequently billed to the parent firm. The franchisor is in charge of national campaigns, especially if the chain is national or worldwide. Local campaigns, on the other hand, are invoiced to a single sales point.
Without a question, there are several benefits for people who want to start a franchise business, but there are also significant disadvantages.
Let’s have a look at the most important ones:
• Costs: In some circumstances, the initial cost might be rather substantial. The cost of launching a local franchise might be several hundred thousand euros, including the admission fee and early setup expenditures. In general, the more well-known the chain, the higher the cost.
• Independence: Commercial affiliation does not allow a large margin of independence. The rules of the game makes the parent company, which delegates to individual entrepreneurs the operational management of individual sales points, but not strategic choices.
• slowness and rigidity: individual entrepreneurs can propose new ideas, products or promotions to the parent company, but times are longer than the independent entrepreneur. In a time of crisis for catering as the current one the independent entrepreneur can decide whether to equipment for example for Delivery, while the affiliate to a large chain must respect the decisions of the parent company.
• The contract: Normally, the affiliation agreement is included in the contract that the parties agree upon at the start. If the entrepreneur wished to cancel the contract, he could have to pay additional fees or penalties.
• To summarize, the franchise is better suited to people who like to focus on the store’s and staff’s operational management rather than the most creative aspect of catering, namely the search for new dishes and tastes to include on the menu. It can often be a more expensive approach to establish a firm, despite the benefits of entering a company that is already up and going.