World Franchise Review 2018

WORLD FRANCHISE REVIEW 36 Special Feature Peru VC in Latin America: the big guys are already here Venture capital also relies on spotting market trends and consumer behavioral patterns. Therefore, venture capitalists play different roles, from mathematicians and psychologists, to fortune tellers, buy they all ask themselves the same question: How to generate value. And this is where the franchise system comes into play, although in the midst of much ignorance despite the surrounding sophistication. The VC industry in Latin America is no longer a game of Latin Americans. The global asset management and private equity firms are already here, and they are all in. But few of them have already discovered the franchisor role. In this way of working, the franchise system not only serves to replicate business models and create consistency across consumer experiences around the world. The main virtue of the franchise is what I like to call “bending of reality”, that is, the ability to generate growth upon resources and time that, otherwise, simply would not be possible. The venture capital industry relies on one thing, buying cheap and selling expensive, or as Warren Buffet, the Oracle of Omaha, knowingly has said, buying from a pessimist and selling to an optimist. A business may not want to grow by being franchised, because it has the necessary resources to generate a certain level of critical mass. Or because it doesn’t want to give rights over its intellectual property to third parties. Or maybe, because its management just don’t understand franchising as a concept. But a business that is internally structured under the correct laws of a professional franchise system, can generate dynamics capable of bending reality, in terms of scale, profitability and sustainability. This is, in terms of market domination. If cashing out is the inevitable fate of any business, generating the highest possible surplus value before its time comes, is not only a matter of talent, but of common sense. And the big guys know it. Fernando López de Castilla Founding Partner, Grupo Nexo Franquicia