Undertaking can lead down mysterious paths. Although opening a restaurant, an ice cream parlor or even a laundry is already part of the DNA of Mexicans, there are those who choose to acquire a store under the rubric of a brand, that is, a franchise.
These investment schemes give the option of joining chains that already have a certain reputation in the market, and although there are some that require an outlay of millions of pesos, there are options in the market that involve less investment.
This format also allows companies to increase their presence, which is why they usually monitor investors who join the brand, to ensure that, in addition to recovering the investment, profits are generated.
In this regard, Francisco Segura, general director Comexposium México, which organizes the International Franchise Fair (FIF 2022), which will take place this year from June 9 to 11, explains that the pandemic left the lesson of increasing people’s knowledge about what a franchise is, and even create more affordable ones for investors so they don’t think they’re just fast food restaurants.
“The audience we need to attract is people who have money and want to start a business but don’t know how to do it, or those who already have a business and want to expand it, because franchise models allow it to grow,” he says. “There is a myth: It is thought that with the franchise they end up working for someone, and no. They actually become a business partner,” he adds.
It is in this context that the franchise business in Mexico has been booming. In the country there are about 90,000 franchised units of different brands, which contribute an average of 4.2% to the country’s Gross Domestic Product, according to an analysis by Feher Consulting.
By 2022, the consultant estimates that they will reach 97,200 units, an increase of 8% compared to the end of 2021. It also projects that the food and beverage business represents just over 32% of the sector, with more than 17,000 units and around 140,000 generated jobs.
What is a franchise and how does it work?
Before acquiring a franchise it is important to know how they operate. In this business model, a company grants the right to a third party to use its brand under a commercial scheme in exchange for payment. There are also different modalities, which allows finding a contract that best suits what investors or franchisees are looking for.
The operation of this business scheme seems not very complex. The franchisor (or owner) receives a payment to give access to his brand, in addition to a percentage of royalties. To this figure belongs the right to control trademarks and distinctive signs, such as logos, in addition to establishing the guidelines under which the business operates. The franchisee has the right to receive patents, supplies and training for the operation of the business.
In the market there are different types of franchises, some to manufacture or distribute products; however, the most popular are the commercial ones. Within this scheme there is a model called “turnkey”, through which the brand performs the total support, that is, it supports the franchisee from the choice of the premises to the support in the operation of the premises, such as the delivery of supplies. .
Among the franchises that operate under this scheme in Mexico are those of restaurant chains, which maintain the same furniture and even ingredient suppliers, to allow the same food and menu preparation processes to be maintained, for example.
“The investor must first know what he wants, because it may be that he likes tacos but is not willing to smell onions all the time, and one piece of advice is to approach the brands and other franchisees and ask them if they are a good deal or not”, suggests Segura.
Advantages and disadvantages of franchises
Before acquiring a franchise, it should also be taken into account that it has some advantages and disadvantages that the investor will face.
In the advantages, it stands out that:
- It is a private commercial formula
- The business model has already been tested
- The franchisee receives support from the brand
- Accompaniment in the operation of the business
However, the disadvantages include:
- Payment for entry fees and royalties
- The investor does not own the brand
- Franchise rules must be followed
- Subject to surveillance by the franchisee
Franchises in Mexico of less than 200,000 pesos
Setting up a Mexican franchise for 200,000 pesos or less can be an accessible model. This cost can be much less than buying a new car, and you may find a variety of areas to explore.
- Ribo Crepas, for example, has an initial investment of 110,000 pesos that includes the license and the equipment.
- The price to install an Immaculate Water purifier may require an investment of 95,000 pesos, depending on whether you want to purchase machinery for an automated or traditional process.
- La Michoacanita offers opportunities from 200,000 pesos as an initial investment for its coffee, ice cream, crepes, waffles or bubble tea franchises.
- Aruma is a franchise that operates in the category of beauty, perfumery and personal care. The cost of entry to the brand starts at 180,000 pesos.
- In the food area is Montoneras Donas, which sells donuts with ice cream, offers licenses starting at 130,000 pesos.