How Do I Start a Franchise Business in Switzerland?

Franchising has become a popular business model as it enables one to operate their own business while leveraging the brand, support, and established systems of an existing company. In this article, we will guide you through the process of starting a franchise business in Switzerland. We will explain what franchising is, outline the benefits for both franchisee and franchisor, and finally provide you with a step-by-step guide to starting your own franchise business in Switzerland.

What is franchising?

Franchising is a business arrangement where an existing company (the franchisor) grants an individual or entity (the franchisee) the right to operate a business under its established brand name and business model. In return, the franchisee pays fees and/or royalties to the franchisor for the rights to use their brand, products, and support systems. This allows franchisees to tap into the existing success and reputation of a well-known brand and benefit from their established operational processes and product lines.

What is the relationship between the Franchisor and Franchisee?

In a franchisor-franchisee relationship, the franchisor typically provides the franchisee with one or more of the following supportive elements: branding, training, marketing support, products, and ongoing assistance. In turn, the franchisee puts in the necessary time and effort to run the franchise business as per the franchisor’s guidelines and standards, and compensates the franchisor with fees and/or ongoing royalties.

Why start a franchise business in Switzerland?

Switzerland is an ideal jurisdiction to start a franchise business due to its robust and stable business environment, corporate-friendly regulations, low taxes, strategic location in Central Europe, and strong consumer demand for high quality products and services. Today, there are over 300 franchisors in Switzerland, including well-known franchise chains such as McDonald’s, REMAX, Starbucks, and Spar.

Get more information about advantages of opening a company in Switzerland.

Starting a franchise business offers many opportunities and potential advantages for both the franchisee and franchisor:

Benefits for the franchisee

• Established brand: There is a lower risk of failure when you open a franchise business because you start with immediate brand recognition. This leads to greater consumer trust and reduces the need for extensive marketing efforts.
• Proven business model: Franchise systems come with established operational processes, reducing the risks associated with starting a new business from scratch.
• Built-in customer base: One of the most challenging aspects of opening a new business is finding customers. However, as a franchisee of a well-known brand, you begin with a built-in and loyal customer base. This helps you generate immediate turnover and means you can be profitable much sooner than if you were to open a business from scratch.
• Existing partnerships: As a franchisee, you get access to many of the existing partnerships that the franchisor has in place. This can mean bulk purchasing discounts and other cost-saving measures negotiated by the franchisor.
• Easier access to finance: Financial institutions understand that there is lower risk involved in opening a franchise business, with a greater chance of success. This also increases the likelihood of being able to access loans on better terms.
• Training and support: In franchising arrangements, the franchisor typically provides comprehensive training and ongoing support to the franchisee, ensuring they have the necessary skills to run the business successfully.
• Combined marketing efforts: As a franchisee, when you put efforts into marketing, you are contributing to existing national and regional marketing campaigns. This shared marketing effort results in greater efficacy for lower cost and helps all franchisees in the network access a larger customer base.
• Market expertise: When you open a franchise business, you benefit from the existing market expertise of your franchisor. The vital knowledge and experience you get from your franchisor will increase the likelihood of success and help you overcome obstacles early on.

Benefits for the franchisor

• Low-cost and rapid expansion: Franchising allows franchisors to expand their brand and reach new markets quickly without incurring the full costs of setting up new branches. If you are trying to grow your small business, franchising can make the process of opening in multiple locations much easier.
• Multiple revenue streams: Franchisors usually receive both upfront fees and ongoing royalty payments from franchisees, providing a consistent revenue stream from potentially multiple franchisees.
• Motivated operators: Franchisors can be sure that their franchisees will be motivated to perform. A franchisee’s profitability is directly linked to the brand’s performance which means they have a vested interest in the success of the business.
• Local expertise: Franchisees contribute their knowledge of the local market, culture, and consumer preferences, allowing the brand to adapt its offerings according to local needs.
• Increased brand awareness: Franchise business models create positive feedback loops for brand awareness, benefitting both the franchisor and franchisees. The more franchises there are in multiple locations, the more people become aware of the brand. And the more they come to love and trust the brand, the more profitable and successful it becomes, and the more interest there is for new business owners to open their own franchise of the brand, and so it goes on.
• Reduced risk: Franchising provides an ideal way for franchisors to expand their brand and business without taking on additional risk. This is because the franchisee incorporates the franchise as a new business entity with its own debts and obligations. The franchisor is effectively protected from anything going wrong with the new business while benefitting from an expanded brand presence and reputation, as well as profiting directly from the fees and royalties received from the franchisee.
• Keep in mind: There is still always the risk of reputational damage or loss of brand confidence if the franchisee does not operate up to the high standards of the franchisor. This is why it is important to have clear quality-control measures and operational standards, and to provide the necessary training and support to enable each franchisee to deliver on these standards.

How to start a franchise business in Switzerland

1. Choose a franchisor

The first step to starting a franchise business in Switzerland is, of course, to choose a suitable franchisor. There are now hundreds of franchise business models in Switzerland to choose from, and many online platforms where franchisors put up offers for prospective franchisees (with details on the type of business activities, fees, royalties, capital requirements, expected profits, support and training provided, etc.).

You may have a clear idea of the type of business you wish to start, or you may be open to various options. Either way, it is important to research and identify franchisors that align with your interests, values, and business goals. You should evaluate aspects such as the franchisor’s track record, support systems, and financial stability, as well as the fees involved, before coming to a final decision.

2. Understand the legalities

Before diving in and practically setting up your franchise business, it is crucial to familiarise yourself with the regulations and legal requirements which apply to franchises in Switzerland. You should consult with legal experts to review franchise agreements and ensure you stay compliant.

There is no specific set of franchising laws in Switzerland, and anyone setting up a franchise business in Switzerland must follow all the usual regulations on company registration and incorporation. Various regulatory bodies in Switzerland outline laws which are applicable to Swiss franchise businesses, including:

• The Swiss Civil Code
• The Swiss Code of Obligations
• The Swiss intellectual Property Laws
• The Swiss Unfair Competition Act

There is no distinction in Swiss law between a franchising business with one franchisee compared to a franchise with multiple franchisees. Both must follow identical laws and regulations.

3. Plan your finances

Once you have chosen the right franchisor and come to grips with the legalities, it’s time to sit down and plan out your finances to see if you are able to afford to go ahead with your venture and whether you will realistically be able to achieve the returns on your investment that you are aiming for.

A professional accounting firm like Nexova AG can help you calculate the initial investment and ongoing costs required, including franchise fees, equipment costs, marketing, working capital, and other overheads. If you need to secure a loan or other form of financing, this is the stage to do so.

4. Apply for a franchise

Next, you will have to apply to your chosen franchisor to open a franchise business with their brand. This will likely involve interviews and assessments to ensure you are a suitable franchisee candidate. In turn, you can find out more about the support and training they will offer and confirm whether they really are the right choice for you.

5. Set up your franchise

Once approved, identify a suitable location for your franchise and negotiate lease terms. If possible, work together with the franchisor to set up the physical space and order any necessary equipment.

6. Training and launch

An essential aspect of a franchise business model is that franchisees are generally expected to follow established operational models and quality standards of the franchisor. Therefore, before beginning operations, you will have to participate in the franchisor’s training program to learn about operations, marketing, customer service etc. Thereafter, you can launch your franchise and implement the established business model.