Franchise business: advantages and disadvantages of doing business under a foreign brand. Business principles. What is Franchise in simple words

Many people want to start their own business, but can not decide on this important step. The reason for such indecision is the lack of an idea or the fear of failure. Therefore, as a result, newcomers stop at the option of building a franchise business.

This article provides information on how to open a franchise, what are the advantages, disadvantages and other nuances in this business.

Franchise Features

When concluding a franchise agreement, the terms of cooperation between the two parties are prescribed. The agreement guarantees the franchisee (owner) the right to carry out commercial activities on behalf of the franchisor, using ready-made schemes providing services or selling goods under the name of a well-known brand.

The franchisor, as a rule, is a well-known company or corporation that has managed to establish itself in the market on the positive side. In addition, it must have a positive image and a good reputation among consumers. Successful European, American and Chinese organizations are actively promoting the franchise, thereby expanding the geographical boundaries and opening new offices for sale own goods and services. How to open a franchise?

The franchisee is granted exclusive rights to exercise entrepreneurial activity under brand name. The franchisor, for its part, undertakes to ensure the following:

A working and efficient business project.
The possibility of using the results of intellectual property.
Corporate identity and maintenance plan.
Training of employees and improvement of their qualification.
Constant interaction, support and advice.
Marketing promotion.

All of these tools allow you to guarantee a stable profit with a total payback period of a year and a half.

material side

For example, a person decided to open a franchise travel agency. To do this, he signed an agreement and received a ready-made business, it remains only to take it and start using it. But the owner of the company shares the trademark not just like that, but on certain conditions. Each franchisor is different, the most commonly used schemes are:

Payment of a lump sum. This is the initial payment that must be paid in order to enter into an agreement. This is a kind of membership fee or rent for the brand. The amounts of such contributions are so large that a novice businessman simply cannot afford them.
Royalty. Paid monthly to the owner. The amount depends on the percentage of the franchisee's income specified in the contract. In other words, the entrepreneur must pay a kind of profit tax to the trademark owner on a monthly basis.

But not everyone includes these concepts. Conditions are case specific. Some organizations take only a lump-sum fee, while others, on the contrary, do not have it, but the franchisee is required to pay a monthly royalty. There are cases when the owner of the brand requires payment of the first installment and commissions for each month. Therefore, before deciding to purchase a franchise, you should realistically assess your own capabilities.

Is it possible to open a franchise store without investments? Yes, there is such a way. Its principle is that the entrepreneur who claims this right must convince the brand owner of his ability to take the business to the next level. This is very difficult task. In rare situations, the franchisor is willing to become an entrepreneur's investor.

Franchise Benefits

A franchise, like any other commercial direction, has its pros and cons, which an entrepreneur should be aware of in advance. Starting a franchise from scratch is a daunting task, which involves managing the relationship between the brand owner and the businessman.

The benefits of starting your own franchise business include:

An entrepreneur buys a ready-made business that has managed to establish itself in the market. It includes assistance in organizing, consulting, supply of raw materials and other components. The acquired trademark is already popular in the market, so the businessman does not have to spend money on its promotion.
For this line of business, it is considered the norm to consult with the franchise owner, support in establishing relationships with suppliers, service companies, advertisers and so on. The franchisee does not need to reinvent the wheel, it has already been done for him.
A loan to open a travel agency franchise, for example, is much easier to obtain. When applying for a loan, the owner of the brand can act as a guarantor of the security of the transaction - this is a big plus. Ordinary entrepreneurs do not have such a privilege.
Low requirements. Franchise business does not require specific knowledge. It is enough for the buyer of a trademark to have some knowledge in the chosen area and elementary management. But you won’t be able to do without spending at all, funds will be required to improve your own business.
The ability to predict the financial situation. When starting your own business, it is very difficult to accurately calculate the profit. But in the event that you decide to open a coffee shop franchise, for example, everything will be much easier. The entrepreneur is provided with a large amount of data, the use of which will certainly lead him to an accurate forecast of the situation of prospects.
No need for market research. All necessary information is collected and provided by the trademark owner. This is a huge time saver and a guarantee of getting results in the first month of work.

Franchise Disadvantages

In addition to the obvious advantages, this form of business has significant disadvantages:

Starting a franchise store requires a lot of investment. Buying a ready-made business and launching it requires significant cash outlays. As a rule, novice businessmen do not have a large amount of money or they are afraid to spend it, respectively, few people consider this option.
Almost complete dependence on the franchisor. This is especially true if the brand owner incurs losses. This will inevitably affect the entrepreneur as well.
Obligations to the franchisor. Personal earnings will have to be shared with the owner of the brand. But the percentage of his share is very small, so the entrepreneur will remain in the black.
Foggy prospects. The liquidation of the franchise network leads to the mandatory closure of the business. The franchisee has the right to operate only as long as the agreement is in effect.

How to open a franchise, where to start?

First of all, it is necessary to determine the direction of activity. Experts advise choosing what is of interest and what a person understands. Especially if it's the first time. If, for example, a future businessman knows nothing about computer technology, then you should not open an office equipment store. If you are interested in fashion, you can safely open an online store of stylish clothes and accessories as a franchise. If you want to use the knowledge gained over the years of study at an economic university, study the offers of credit institutions.

In addition to personal hobbies, you need to remember about the financial side. Buying a franchise business is not difficult, but they all differ in initial cost and subsequent investments. The most expensive are the offers of restaurants, hotels, fitness centers and hypermarkets. Retail stores are much cheaper.

Purchase method

There are several ways to buy a franchise:

Investment of own funds.
Bank loan.
Investment by the brand owner.

The most obvious option is to buy the case with your own funds. But not everyone has this opportunity. Therefore, most entrepreneurs start building their own business with money borrowed from the bank.

There is a third option that allows you to open a franchise store without investment. It involves funding from the company selling the franchise. This can only be done if the franchisee is already working in the right organization and she practices a similar form of relationship with employees. An enterprising employee can be appointed to the position of branch manager, and after a while become its owner.

If this option is unacceptable, then you can look for an investor on the side. The mere fact of acquiring a franchise significantly increases the chances of success - businessmen are more willing to invest in established brands than in start-ups. This is explained by the fact that no one can guarantee the success of the latter.

Choosing a profitable business

There are special organizations that provide a list of open franchises in Russia, but you can contact the owner of the selected trademark on your own. The choice of such companies is great, but are they all profitable? Here are the main signs that the chosen brand will be profitable:

Wide network of operating points. When a company has many open points and all of them are successful, it can be concluded that the brand has a future.
Lifespan. It is better to choose an organization that has been operating in the market for some time and managed to recoup the investment. Otherwise, there is a great risk of running into those who are not doing well, and they sell franchises to cover their own expenses.
Entrepreneur support. It is necessary to find out in detail what kind of assistance the brand owner is ready to provide to the buyer. All support measures should be recorded on paper, do not take a word.
Business plan. Serious institutions provide ready business plan and materials on evaluating the effectiveness of the selected project. One-day companies only assure that it is profitable to open this franchise, without indicating any specific figures and without giving guarantees.

It should be understood that even the most successful franchise cannot guarantee one hundred percent success and high income - a businessman must put in a lot of effort and effort himself. It is necessary to carefully study the market with which it is supposed to work - is there an interest in the audience for the selected services or goods, are there analogues, what are the prices and what do competitors offer.

Next steps

Don't know how to open a franchise? After all the benefits and risks have been calculated, and the choice of a franchise has been made, several more important steps will need to be overcome:

Commercial project update. As noted above, brand owners, focused on long-term cooperation and results, provide a ready-made business plan. It includes financial planning and an estimate of the necessary investments. This is a standard project that requires some modifications as conditions vary depending on the city and point location. The requirements for opening in Samara will certainly be different.
Rental and renovation of premises. Before choosing and renovating a space, as well as hiring employees, it is worth learning about the requirements from the brand owner. Many companies set strict limits on this - the area and location of the premises, design, team composition, and so on. Some franchisors help resolve all related issues and provide finished design project. The most thorough organizations independently train employees, send merchandisers and organize the grand opening of the office.
Planned interaction with the seller. After the purchase and opening of the store, the parties are not limited to regular payments, the brand owner takes an active part in the activities of the new outlet. The franchisor provides marketing support, conducts training and retraining of personnel, develops promotions to stimulate sales (special offers and sales). Retail stores receive recommendations from buyers for the purchase of specific products. The parties regularly interact on the issue of procurement and delivery of goods.

The payback of a franchise depends on many things, but on average, these terms are much less than when starting your own business, built from scratch. And the benefit is more stable, since the entrepreneur is insured against many difficulties that will arise when doing business on his own.

Franchise cost

The cost of the selected project directly depends on the field of activity and the popularity of the selected brand. Of the huge list of options available, the most popular and cost-effective are fast food outlets and clothing stores, and you can also open a pharmacy franchise.

The amount of a lump-sum payment for a medium-sized business starts from 150 thousand rubles. A popular brand like Adidas will cost $20,000, while a StarBucks outlet will cost $150,000. Each trademark owner independently determines the final cost of the franchise, taking into account the expected profit of the franchisee and an assessment of the economic efficiency for their own business.

Should you start a franchise business?

Is it profitable to open a franchise? Yes, if you do it right. Before making a decision, it is necessary to analyze the socio-demographic characteristics of the area and the level of competition. An objective assessment and detailed consideration of the market situation will prompt a novice businessman which direction to choose.

Franchising, as a form of entrepreneurial activity, is the most promising and effective way running a small business. Both parties involved in the transaction receive favorable conditions for their own development. The seller, who is the owner of the brand, gets the opportunity to expand the boundaries of sales and attract new consumers of his product. The franchise buyer receives a proven and working business scheme, as well as the active support of the franchisor and assistance in resolving important issues.

Starting your own business, in addition to the advantages, also brings with it certain risks, especially at the very beginning. One of the most safe ways start in business is a franchise. It is believed that franchising originated in 1851 in the United States, and concerned the service and sales of a well-known sewing machine"Zinger". Today, franchising is becoming more and more popular. It is distributed all over the world, but the United States remains the leader.

Franchise vs Franchise: What's the difference?

Franchising is a specific relationship scheme designed to create and run a business. The subjects of this system are two parties, for which the following terms are used:

franchisor;
franchisee.

The first party owns a trademark under which the second party to the contract wants to work. Franchisees will need funds to purchase a franchise. In addition, it must meet certain requirements of the trademark owner.

Based on the decision on cooperation, an agreement is drawn up. Its conditions in each company may differ, but its essence is that the franchisor, for a fee, transfers to the use of the franchisee trademark together with the developed technology for the provision of services or the production of goods.

The franchise agreement itself, or rather, its object, is called a franchise. If you say in simple words, then franchising is a business organization system, and a franchise is a set of benefits and advantages necessary for doing business.

Franchising and franchise are related concepts. Basically, there is little difference between franchising and franchising. Franchise is a package that is bought from a company (a complete business system), and franchising- the purchase process or the name of the transaction.

A ready-made business with a scheme of work that has proven itself well - this is what a franchise means. It is called an advanced form of licensing. This is due to the fact that in translation the word franchise (franchise) sounds like a license, a benefit.

Below is a video where a businessman explains in simple terms what a franchise is:

The buyer receives a ready-made technology, in other words, detailed instructions on how to create an operating business under the trademark of the purchased franchise. But before buying, you need to find out under what conditions the franchise is granted.

What is included in the franchise package

In order for a franchise to be competitive, you need to know in advance what you are buying and what level of support you are guaranteed. The franchise package may include:

support at the stage of opening and functioning of the enterprise;
training;
business technology information;
use and technologies of production and sale of products;
advertising support.

Other items may be included in the list. Before buying, you need to clarify which services are included in the package, and which are provided only for an additional fee.

Franchise types

There are several types of franchising.

Industrial. It is most often based on the transfer of a license for the manufacture of patented products.
Commodity. It boils down to the acquisition of a marketing scheme for a group of goods that are produced by the parent company. Used to implement well-known brands.
Business. It has much in common with commodity franchising. It is based on the use of a trademark and business technology using techniques that have been developed in the parent company.
Conversion. The form of doing business is the possibility of changing the main profile of the company.
child. Allows you to create an independent business under the leadership of the parent company. This type of franchising has not yet received due development.

The classification is rather arbitrary. AT different countries"franchise" can mean different concepts.

An increasing number of foreign expressions, phrases and words come into our everyday life. This is a natural phenomenon, because if a couple of years ago some term was not known to anyone, and now everyone is hearing it, then it turned out to be appropriate in the Russian lexicon and only occupied a free niche, displacing cumbersome and complex linguistic constructions. All this fully applies to the term franchise - "benefit", which we borrowed from French not so long ago, and now we are actively using it in domestic business. Indeed, many such foreign expressions are also found in the field of business relations, which reacts very quickly to changes in market conditions and is simply obliged by the nature of its activity to promote innovations to the masses.

Introduction

However, not all companies follow own principles running a business and building its hierarchy, for some it is much easier to follow the beaten path of network leaders, which provide turnkey solutions management. In simple words, only renting a trademark and its products is practiced, borrowing all the complexities of the system. As a result, opening a franchise business is sometimes much easier than competing with small players. If earlier only a few resorted to such methods of doing business - advanced nouveau riches or experienced businessmen with experience in organizing international companies, now everything is different, and no one will be surprised by such a model. As a result, talk about business is everywhere. They compare the best-known examples of successful companies that have offered the market a universal or multicultural business model that has proven to be relevant in all corners of the world.

First application in practice

The most striking example, which is rightfully called the founder of franchising, is McDonald's. Overall, her success stories are the envy of many companies, but there are also instructive moments. After all, the network owes its popularity not to the McDonald brothers, who organized the first fast food establishment, but to Ray Kroc, a modest businessman who previously sold equipment for making milkshakes. A significant meeting that turned the life of the whole society upside down did not portend anything special. I went to have a bite to eat in a small establishment and was very surprised by the popularity of the system presented in it - fast and inexpensive food, delicious hamburgers with soft drinks were just the format that society with an eternal lack of time needed. After talking with the McDonald brothers, the businessman offered to sell their idea throughout the United States of America and concluded the world's first franchise agreement. Ray Kroc's personal funds were not enough to advance the cause, and he decided to mortgage his own house. After this fateful decision, events move very rapidly: now the McDonald's empire has more than 30,000 restaurants and is still gaining momentum, and the businessman is a billionaire.

Activity Data

Some interesting statistics about establishments that are found in all corners of the globe, and a 52-year-old businessman who entered into a franchise agreement with the brothers, whose name flaunts on the signs of these restaurants:

In the 70s of the twentieth century in the United States of America, citizens spent at least 6 billion dollars annually on food at McDonald's. At the beginning of the twenty-first century, these values \u200b\u200breached truly colossal figures - more than $ 110,000,000,000. These figures exceed the total expenditure on books, magazines, newspapers, music, videos, education, leisure, computers and software taken together.
The popularity of the restaurant is explained by the fact that it focuses on family values and children's holidays that are understandable all over the world. After all, the image of a clown is so recognizable that only characters known for millennia can compete with him - Santa Claus and Father Frost.
At least 90% of new vacancies that are freely available on the US market are provided by this well-known network. Every eighth person worked at McDonald's.
The restaurant chain's advertising spend is in the millions and remains one of the highest in the world.
Starting a McDonald's franchise business is not as easy as it used to be, but with $300,000 for the minimum down payment, it can be done.

What did Ray Kroc do?

The businessman did not invent something new or make changes to the existing principle of customer service in fast food establishments. He only took the ideally established system of doing business from the MacDonald brothers and rented it to later sell it to other interested parties. All recipes of the restaurant, features of cooking, prompt customer service, principles of staff training and necessary equipment have been carefully studied and applied with the greatest efficiency in megacities, where they turned out to be more relevant than ever.

Comparison with Subway

To finally understand what a franchise is in business, it is worth considering the principles of its functioning on real examples. Let's stop our choice on the nearest competitors of the company "McDonald's" - Subway. They came closest to the power of the founding corporation of fast food chains.

Specialization

At its core, Subway also focuses on small businesses - the franchise of this restaurant is sold in almost all countries of the world, and in this moment they have over 34,000 establishments. While the same "McDonald's" has only 33,000 points of sale. It would seem that a larger presence should lead to revenue leadership, but this is not the case. The annual revenue of "McDonald's" on average exceeds the volume of financial flows of its competitors by almost 2.5 times.

Specific examples

Let's dot all the i's, because the question of what a franchise is in business causes a lot of confusion, especially when it comes to the principles of its functioning in various fields. Consider its frequently encountered types in other areas of business.

Principles of opening a travel agency franchise

This organization is responsible for the implementation of leisure end user. After all, the franchise of a travel agency consists only in the sale and performance of intermediary functions between operators and consumers, for which the company receives its interest. Most obvious benefits business cooperation between two parties in the field of business lies in the fact that the company-newcomer minimizes the possible risks. After all, the organization opens under a well-known trademark, which speaks for itself and is, as it were, an additional licensing of a travel company and a guarantor of its solvency and reliability. However, if there is a choice - which travel agency franchise is better, then you need to pay attention to the following nuances:

the size of the lump sum;
the presence of a monthly fee (royalties);
the reputation of the organization;
terms of work in business and its success;
staff;
the number of partners of the company;
availability of information about leaders in the public domain.

Many firms allow you to find out these questions in an online form on their homepage or after filling out a questionnaire on the site. After that, representatives of the organization contact interested parties and clarify all the details of cooperation.

Car franchise business

Vehicles with engines internal combustion or on other types of power plants are found on the streets of cities regularly. After all, the days when a car was considered a luxury have long passed - now it is just a means of transportation. It justifies its existence by the convenience of traveling from point A to point B, and many happy owners can no longer imagine their lives without an "iron" friend. Therefore, service stations and service centres have become very profitable business whose liquidity is beyond doubt. After all, it provides a stable income, and the profitability and prospects of its development are generally difficult to dispute.

The specifics of the activities of transport services

In a car service, a franchise can be a great solution for those who are just planning their own business. However, it should be understood that such investments should also be carried out wisely. After all, franchising in this area offers various packages - multi- or mono-brand. The fundamental difference is that while a single-manufacturer contract allows only a particular brand of car and keeps entrepreneurs within corporate boundaries, a multi-manufacturer business operates differently.

Business Principles

Away from megacities where people prefer used cars, the same models are rarely found. Vehicle. Therefore, a mono-brand franchise for a small city will often be inappropriate (although there may be exceptions, as in the case of the Far East, where most vehicles are imported from the Land of the Rising Sun), while in megacities it is possible to successfully implement a project, where only cars of one manufacturer will be serviced (for example, Ford, Toyota, Mercedes, and so on). Thus, the services provided will be brought to perfection, and the flow of regular customers will provide the best advertisement for the service station or warranty service.

Risk prevention

If you need to create an insurance company, then there is no need for specialists to explain what a franchise is in business for a particular case and about its importance in a service where customer acquisition is built on trust. After all, when organizing your own company, which will assume obligations to prevent or compensate for risks, it is important to rely on the experience of qualified market players, since it is impossible to build a liquid or properly functioning system from scratch. It is necessary to adopt the skills and principles of the activities of the largest companies or networks involved in insurance, both legal and individuals. After all, compensation for property or other cases upon the occurrence of obligations is reimbursed by the organization to its client in the amount that is provided for by the contract. It is the amount of such compensation that determines the insurance deductible. In the most common case, payments on it are carried out as follows. Compensation is not paid if the value of the loss does not exceed the amount indicated in the contract. However, a conditional deductible assumes that if the parties exceed the approved financial losses, an insured event occurs and the damage is compensated in full.

Advantages and disadvantages

Although the use of off-the-shelf management technologies is fraught with many positive sides, it is worth considering the issue comprehensively, since the legal nuances of the contract have a significant impact on the success of the development of the case and may require some amendments. Therefore, before signing the papers, it is important:

discuss aspects of future activities with auditors and consultants who, within their competence, can provide the necessary explanations or recommendations;
soften the rules of cooperation and the conditions for resolving disputes;
display in the contract the terms for making corrections by the parties, which will allow to fully adjust the terms of the franchise;
provide for provisions for the mutual payment of legal costs;
exclude positions that recommend holding a debate in the arbitration, which is a private matter and does not create precedents;
agree on the principles for extending the contract;
prescribe the procedure in case of force majeure situations and preferential conditions for the period of restoration work.

Subject to these important conventions, positive business results will not be long in coming and will delight both customers and owners who have taken responsibility for the development of the business.

Due to the crisis in the country and large quantity cuts in the workplace, many Russians have a natural question - what to do next? For those who have savings and have the opportunity to invest in a business, as well as for those who want to start their own business, but are afraid to take risks, this article is dedicated.

Today we will talk about the advantage of building a business under the auspices of a large developing company that has established itself in the market and has a recognizable, salable brand. Already guessed? Let's talk about a franchise business.

What is a franchise, and what is it eaten with?

The franchise method came to us from the West, and one of the most striking examples of this type of business can be called the famous chain cafes.

Their undisputed leader is MacDonald's, followed by Starbucks, Shokoladnitsa and others like them.

This does not mean that the sale of franchises is concentrated only in the food service industry.

You can buy an auto parts store franchise or open a franchise tourist agency, you can become an anti-collector lawyer, or install vending machines. Even the production of PET bottles for draft drinks is now franchised.

What is it all about?

Franchise – sale of a ready-made business model that is already established in the market.

The buyer - the franchisee - is given the opportunity to invest a certain amount of funds and start a business in short term, under the name of a well-known company.

Do you want to open a restaurant? A little-known cafe will collect a pool of loyal customers for a long time. Open McDonald's - and outdoor advertising alone will attract people to you from the very first days.

sells ready business model its owner is a franchisor . To purchase a franchise, the buyer must pay a lump-sum fee - a one-time payment for the opportunity to be included in the list of partners. Essentially a membership fee. Then, monthly or quarterly, the franchisee pays royalties for work under a franchise - a percentage of income. These are the basic conditions for running a franchise business.

There are some companies that do not charge a lump sum. Some waive royalties by charging a one-time payment.

You can find this information by reading the Franchisee section on the website of the company you are interested in or by calling the contact numbers indicated on the website.

How do you know if a company offers a franchise job?

At the moment, all major networkers use this method of work.

It allows them to expand their regional network without creating competition in the market, to control the development of the brand and increase its awareness. Plus, this is an additional, and sometimes very significant income.

In order to select the most interesting franchise, you should refer to specialized catalog sites.

They usually contain cards of companies, with the conditions for working on a franchise, indicating a lump-sum fee and royalties.

The choice of a franchisor can be made either by the direction of its activity, or by the rating of the company. Each option has its own advantages. But Special attention should be given to what profit is predicted by the franchisor, and what payback periods are indicated.

The most popular lines of business that can be created by franchising:

trade;
services sector;
public catering;
Production of goods.

Advantages and disadvantages of running a franchise business

Let's talk about what you get from working under a well-known brand.

Benefits of a Franchise

As already mentioned, the first advantage is a well-established business model.

This will allow you to simply follow the instructions of a personal mentor, and quickly launch your own business, avoiding almost all the "pitfalls" that a novice entrepreneur faces when starting his own business.

The second advantage is a recognizable brand. A company that is on everyone's lips inspires more confidence in the consumer.

People are more actively buying or using the services of trusted market players, for them your company is part of a familiar and familiar network. They are confident in the quality of goods/services. This allows you to reduce the impressive advertising costs that are an inevitable companion of novice businessmen.

Minimal risks. Compared to new projects, the success of franchising companies is several times higher. According to statistics, about 14% of entrepreneurs who bought this or that business model could not get used to this niche and develop normally.

Your franchisor is interested in the successful start and development of your enterprise, as it brings income not only to you, but also to him.

Therefore, constant support and consultations from his side are provided to you.

We should also mention more loyal lending conditions for a franchise business, since your franchisor can act as a guarantor between you and the bank.

Banks are willing to accommodate such clients, and this will greatly simplify the procedure for obtaining a loan for business development or replenishment of working capital.

A clearly defined amount for starting your own business can also be attributed to the advantages of working under a franchise. You know exactly how much money is required to pay a lump-sum fee, directly register legal entity or individual entrepreneur, renting premises and purchasing the necessary assortment (if necessary).

The results of this section will look like this: Working under the franchise of a well-known brand, you get:

easy start;
ongoing consultations;
support for mentors;
ready business model;
recognizable brand;
consumer confidence;
quick payback;
ease of obtaining a loan;
minimal risks.

Now let's talk about the disadvantages.

A considerable number of entrepreneurs believe that a franchise is certainly very expensive. In fact, there are franchises with minimum investment. By clicking on this link you will find out which franchise options will cost you a small amount.

Flaws

Despite the fact that by buying a franchise, you become a full business partner of the franchise organization, be prepared for the fact that a full partnership can turn into total control over the quality of service and the very conduct of business by the franchisor.

Not all companies “sin” with this, but in a number of rules of certain franchisors (for example, McDonald’s), you can find such items as the rules for wiping tables after a client. And after all, they will monitor this, and check it too!

The first disadvantage of working on a franchise is that you must strictly follow the rules of work that are developed by the franchisor and adhere to all the rules for servicing clients / buyers established by him.

The second drawback is the total control by the franchisor and frequent checks your business.

If you violate the rules of work adopted by the company, you may be subject to penalties. This is due to the fact that the franchisor monitors its reputation, hence the need to work according to strict rules. The essence of this approach is still clear - all these checks and rules are aimed at gaining consumer confidence.

Work according to generally accepted standards and high level customer service aimed at promoting the brand and winning its love among customers. This plays into your hands, in the end - after all, who will go to a store or cafe where waiters or sellers are rude to the client?

A tough approach to training new employees will eventually lead to a positive result, but it can also get on your nerves.

That's why this shortcoming can be attributed to conditional - it all depends only on your attitude to this kind of control.

The disadvantages include the fact that a franchise business requires relatively large investments at the first stage.

Starting a business with 100 thousand rubles will definitely not work. The minimum starting capital for future franchisees is from 500 thousand rubles. Better - from 1,000,000 rubles.

Brand dependency also has its downsides to keep in mind - if your franchisor suffers losses or closes, your business will be affected as well. The franchisor's losses are your losses, the closure of his business means the end of yours, since you are running a business under a franchise while the contract is in effect.

Conclusion

Despite certain shortcomings, more than 9,000 enterprises successfully operate under a franchise in Russia, and their number is growing every month. In order to avoid risks, it is enough to choose a reliable franchisor and carefully study the terms of the contract under which you will work.

Therefore, if you are thinking about starting your own business, check out the franchise directory. Maybe it will ideal solution to start your own business?

The lack of initial capital significantly complicates the opening of a business. Let's consider how possible.

How to make money on the resale of goods, read. Consider what can be sold during a crisis and where to get start-up capital.

What is a franchise

Aspiring entrepreneurs face difficulties and problems that can lead to the collapse of an idea. A good option is to cooperate on a franchise with successful company. This type of business is most in demand in developed countries, where it accounts for 30% of all operating establishments in the service and trade sectors.

The term means a special kind of business relationship between an entrepreneur and a company that has successfully taken place and has a brand.

In simple words "franchise" is a long-term lease of a business project on the terms of the trademark owner.

A special agreement provides for a whole range of services that greatly facilitates the start and allows you to use:

The name of the brand and attributes;
General working style;
Branded recipes or formulations;
Technologies of work and service.

This system of doing business is rapidly developing in the domestic market of goods and services. If it takes more than one year to independently create a project and bring it to a stable result, franchise work can give a good profit in six months.

The difference between franchising and franchising

These two terms are actively used in the designation of such transactions.

An entrepreneur should understand the difference and correctly operate with them:

Franchise denotes what is bought on a long-term lease (rights, prescriptions, equipment, etc.);
Franchising– the process of acquiring a long-term lease.

The latter is a way of doing business, which involves the purchase of a brand or production technology, staff training and the creation of a branch of a well-known brand. The term "franchising package" is often used. It combines documentation, manuals and materials belonging to the company.

How does a franchise work

Before understanding what a franchise is and how it works, you need to get acquainted with the basic terms and names.

There are two parties involved in organizing a business project:

Brand owner directly franchisor): sells a license, allowing you to work on your behalf under certain conditions;
Buyer ( franchisee): uses the acquired potential in the working process, transferring a part of the income determined by the agreement to the franchisor.

A franchise is a fully prepared plan and model for running a business project, so the future entrepreneur does not need to spend time on organizational issues. Despite the cost, this option is beneficial for both parties. The new owner receives support and support, and starts working without a huge initial capital, leaving himself about 90% of the profit in the first month.

The brand receives a stable profit in the form of:

Lump sum, which is paid once after the signing of the contract. This amount gives the right to open a business project under the sign of a famous brand. It includes all costs for launching, designing and equipping a new enterprise (rent, development of a marketing and advertising strategy, staff training);
Royalty as a percentage of total turnover. In most cases, payment is made monthly to the franchisor's account and amounts to approximately 5-10% of the profit received. This is a kind of replacement for rent. In the commodity form of franchising, a royalty is a regular purchase of goods for a certain amount.

Royalties are the main source of income for many franchisors engaged in trading activities or providing services.

The contract specifies one of the payment options:

Percentage of product sales;
A fixed amount that is paid annually (or quarterly);
The trade margin on branded goods, the sale of which is carried out by the franchisee.

A low percentage of mandatory payments at the level of 10% is an acceptable amount even for a novice entrepreneur. The brand's popularity helps it attract a large number of customers, recoup investments with minimal risk. Such a transaction is beneficial for a franchisor company not only by the return of stable profits without preliminary investments. It allows you to expand and advance in the market, to receive high incomes.

There are two main types of systems that are found on the market:

Merchandise Franchise: store chains are being created different type for the sale of industrial products or food products. The franchisor himself is often the supplier of these goods;
Service Franchising: a network of training centers is developing, which train specialists for new branches, provide equipment and control.

Such types of work were chosen by the well-known companies McDonald's, Lukoil and Zara, the Perekrestok retail chain and mobile operator Beeline. Economists identify at least 70 interesting areas where the franchise is relevant and in demand.

The first places in such a list are occupied by:

Production of popular foods and drinks (snacks, chips or beer);
Supermarkets of various types (food, Construction Materials or gardening)
Gyms and health centers, beauty or massage salons;
Public catering (from fast food eateries to reputable restaurants);
Pawnshops and organizations providing quick microloans;
Sale sports nutrition, oxygen cocktails;
Construction and repair services;
Departments of household appliances or decor stores;
Representation of well-known online stores.

The most promising areas are those related to public services and the provision of various services. They show high sales turnover, so the franchisor will quickly and consistently receive decent royalties.

Types of franchises

There are several types of franchises that differ in terms of cooperation and interest rates for using the brand:

free- the most popular option that gives great opportunities to the entrepreneur. It allows you to make innovations and features in project management. This type is characterized by affordable monthly interest, the ability to use a trademark, interesting free master classes and other privileges. It is more like a dealership than others.
classical- provides for a standard approach in the form of a lump-sum contribution, compliance with all rules for the provision of services on behalf of the brand, periodic activity reports to the main office. Clear conditions and strict limits distinguish foreign franchise companies.
Business for rent- a franchise entrepreneur receives a business project for management for a certain period. During this period, all income is distributed in the agreed proportion.
Golden- This is an option for experienced businessmen, which allows you to purchase from the franchisor the right to be the sole representative of his brand in the region. With a high cost of a lump-sum contribution, the entrepreneur receives broad rights and opportunities for project management. They even extend to the possibility of selling a franchise to other businessmen.
Silver- the most convenient form of franchise. The company is completely turnkey, independently looking for a place to rent, personnel, and solves organizational issues. It is transferred to the franchisee on a monthly interest basis, and the company is removed from management.
Corporate- the contract provides that almost all actions of an entrepreneur who has acquired a franchise are regulated and controlled by a well-known company. He plays more of a managerial role.
Import-substituting view- involves the production of high-quality products, similar to branded ones, but under its own name. This makes it possible to preserve technology and originality while working with ready-made recipes or instructions.

The latter has recently appeared on the domestic market, but is actively promoted by foreign companies producing food, cosmetics and detergents.

Franchise cost

When choosing a franchise for many entrepreneurs, the main issue is cost. It directly depends on the fame and popularity of the trademark, the position of the company in the market of goods and services.

An important component is the list of services and equipment that will be available after making the first installment. The average franchise size ranges widely from $1,000 to $100,000.

The most loyal conditions for a lump sum are offered by supermarket chains, chains of small eateries or cafeterias. Given the economic hardship for SMEs, many have canceled the initial payment. This attracts potential franchisees on favorable terms.

The second important issue is regular royalty payments. Almost always, they are prescribed in the contract not in a fixed amount, but as a percentage of turnover or profit. Most fast food chains, grocery supermarkets are limited to 2-5%. Narrowly focused companies or broadly famous brands may require 10-12% for work under their own name.

Some entrepreneurs do not have the financial means to buy a franchise package, but they have organizational skills and a desire to develop their own business.

In this case, the exit will be a franchise without investments, which can be obtained in one of the difficult ways:

Find a network with a missing or formal lump-sum fee;
Submit an original business plan and try to get a small initial investment from the franchisor;
Look for interested third-party investors on favorable terms.

A common option is when a network provides franchises on the most convenient terms to its current employees. These are talented managers or heads of departments who have the opportunity and desire to become a co-owner of a new branch or outlet.

The benefits of franchising

The number of enterprises that are actively working under a foreign brand has exceeded 10,000 projects.

Each of them appreciated the obvious benefits of cooperation:

Low risk. Entrepreneurs with little experience in financial affairs receive support and advice from the first minutes of work. Many franchisors accompany partners throughout the entire term of the contract, teach new techniques and technologies.
recognizable brand name. It is easier for a novice businessman to settle in the market "under the wing" of a brand with a good recommendation. The product or service is already known to customers, is in demand and will quickly bring the first income.
Saving time for project promotion. Most businesses take at least 2 years to build their own brand and get their money back. A franchise project can reach self-sufficiency in 5-6 months.
Professional Support. Large companies seriously approach the preparation of future franchisees. For them, training programs and courses are held on the topic of production, doing business and customer service. Personnel who will work on the basis of franchising technology are trained free of charge. Most brands are ready to provide legal assistance at any stage and provide access to useful information.
Minimum advertising spend. Companies with a recognizable trademark constantly run large advertising campaigns. Therefore, franchisees can limit themselves to low-cost advertising in local media and social networks at the level of their region.

The main advantage for a franchise company is the guaranteed sale of a certain volume of products. Brand owners can plan the pace of production and work, future costs and develop new products.

Franchise Disadvantages

Every trade has its downsides. There are also a number of shortcomings in the work on the franchising system, which the entrepreneur must remember before the final signing of the contract.

List of disadvantages:

Strict framework. All actions and decisions of the franchisee are regulated by the cooperation agreement with the brand. He has no right to violate the technology of production or provision of services. Restrictions may relate to the design and location of the premises, its area and the number of staff.
Inability to choose equipment or raw materials. In addition to monthly interest payments, the contract specifies the conditions and volumes of purchases of materials only from the franchisor. This limits in technical development and improvement.
High price for profitable franchises. Many projects have a large lump-sum contribution and are beyond the means of talented entrepreneurs. The cost can exceed $50,000 with small regular payments. This is typical for foreign companies that invest big money in advertising and development of own technologies.
Control by the franchisor. It is not always comfortable and easy for aspiring entrepreneurs to work under the close supervision of a brand. This includes regular reports in various forms. All options and terms are specified in the contract, so you should weigh the possibilities of such close cooperation. It is better to choose a more obscure project that will give freedom of action and bring pleasure from work.
Limitations in self-expression. Strict technology compliance requirements may include certain promotions, pace of development and expansion. Buyers of a free type of franchise have a large selection of marketing tools. In this case, the company practically does not interfere with the principles of franchisee management.

Among other disadvantages that accompany the work, experienced managers highlight the fast pace of work. The company provides a clear regulated plan for the next 2-3 years, which does not allow you to relax or retreat. All products or services must strictly comply with the franchisor's regulations, and any violation leads to the revocation of the license and termination of cooperation.

How to buy a franchise - the main stages

After assessing all the risks and prospects, you can start looking for the best offer. Running a franchise business comes with certain responsibilities and restrictions. Therefore, a quick return on investment and the profitability of the project largely depend on the capabilities of the franchisor.

Important! You can find a franchise in our. It contains the most reliable franchisor companies that have long established themselves in the market!

The choice of a future partner should be considered carefully at each stage of the transaction:

Market analysis and selection of a promising direction activities. Each area has certain problems and shortcomings. Profitability depends on many factors, including the location of the office or outlet, the number and level of training of staff.
Search for the optimal franchise in catalogs and websites, careful study of each proposal.
Introduction to the franchise company, working conditions and requirements for applicants. Reputable brands are willing to make contact and are ready to provide maximum information.
Communication with established franchisees who can provide guidance, advice, or highlight controversial business issues.
Getting advice from a franchising specialist. It can be found in a consulting or legal form. It will help to understand the contract, show hidden opportunities and "pitfalls" of the business project. The lawyer will study the proposed documents, check the correctness of registration of trademarks and licenses.
Assessment of own financial capabilities. In addition to the down payment, investments in the design and rental of premises, hiring staff, paperwork and seals may be required.

The final stage will be the conclusion of a franchise agreement with the selected partner, the signing of contracts and fruitful cooperation. Experienced franchisees strongly recommend that novice entrepreneurs consult with lawyers at all stages and analyze each step.

Requirements for a potential franchisee

The financial crisis has forced companies to reconsider their selection of candidates for cooperation. The main criterion is the financial capabilities of the franchisee. In addition to the lump-sum contribution, decent expenses will require rent and equipment of the premises, the purchase of the first batches of goods or raw materials.

Franchisors indicate the minimum starting amount that a potential candidate should have:

McDonald's network - more than 1 million rubles;
Clothing brand Zara - 1.2 million rubles;
LLC "Burger King" - more than 2 million rubles;
Coffee Woods coffee houses - from 200 thousand rubles.

When interviewing representatives of a franchise company, the following points are of interest:

Experience in a managerial position, ability to lead a team and make decisions;
Knowledge or skills in the chosen field of activity;
Availability of space for production facilities, a restaurant or workshop;
Psychological stability and the ability to work with limitations, under control.

The main problems for partners arise with a different approach to doing business and solving difficult situations. Therefore, foreign companies often conduct special testing and surveys. It helps to assess the potential and stress resistance, the ability to maintain the corporate spirit. Domestic companies give preference to work experience and financial stability.

Features and content of the franchise agreement

After choosing what to open under a franchise, the conclusion of an agreement is an important component that determines the norms and rules of cooperation between the parties. Therefore, do not neglect the advice of a lawyer, the study of each item.

A franchising agreement (commercial concession or license) must be concluded in writing. The validity period in this type of relationship is not a mandatory part of the document and can reach 50 years.

Franchise or commercial concession agreement signed between the franchisor and the franchisee. The first is indicated as the copyright holder transferring certain rights for use. The second party is a natural or legal person.

The subject of a commercial concession agreement may be: a trademark of a company, production technologies or know-how. Be sure to specify the volume and terms of submission. The document details the method and amount of payment of the lump-sum contribution, as well as royalties. By agreement of the parties, these points can be indicated in percentages or in specific numerical terms.

Sometimes a subconcession clause is specified in the contract. It means that, under certain conditions, the franchisee can transfer the rights to a third party to carry out entrepreneurial activities. The parties may indicate other situations that can lead to a change in conditions: the unprofitability of an open business project, changes in the composition of management and other circumstances.

Rights and obligations of the parties

The franchise agreement is primarily aimed at securing the rights of the parties and the designation of their obligations.

The franchisor is required by law to:

Transfer to the partner in full the documents and equipment that is necessary for doing business;
Guarantee and ensure the uninterrupted supply of goods or components of proper quality;
Train staff in the technology of the work process;
Provide franchisees with full comprehensive advice on all issues related to working moments.

The brand reserves the right to control the activities of the branch, the quality of its products or the provision of mass services to them.

The agreement provides for the following rights and obligations of the franchisee:

The use of the trademark and all technological capacities only in accordance with the rules of the document;
Provide high quality products manufactured under this mark;
Comply with all the rules for using branded equipment, do not change the technology and recipe;
Do not declassify technologies and professional know-how;
Participate in the financing of the advertising fund, support promotions on behalf of the brand.

The contract may contain other clauses and sections that regulate relations between the parties and make their work comfortable. They depend on the type of franchise, type of activity and other indirect factors. The document should not restrict the rights of the franchisee, especially in the area of pricing and project management. It is subject to mandatory state registration.

The conclusion of a franchise agreement gives the entrepreneur the opportunity to open a profitable project under the authority of a serious brand. In order for cooperation to become profitable and full, it is necessary to register all the exciting moments and nuances, discuss them with an experienced lawyer.

Experts consider the problem of keeping technologies and recipes secret, as well as the negative in the case of franchisees, among the disadvantages of the agreement. A serious problem is the success of a branch that leaves the brand network and becomes a competitor in the industry.

Contents of the franchise package

After the conclusion of the contract, the company provides the new partner with a franchise package, the contents of which are covered by a lump-sum fee:

The possibility of using a well-known trademark in the production process;
Developed instructions and recommendations on corporate identity, design and packaging;
Developments by organizational structure: training and motivation of personnel, creation of conditions for work and development, job descriptions;
Information about the product and raw materials, including certificates, norms and technologies;
A complete list of trading partners and wholesale purchase centers with coordinates;
Instructions for launching and maintaining a business project;
Requirements and recommendations on pricing policy;
Transport schemes.

Franchising packages of each brand may vary, so it is better to specify the exact list of services and documents individually. For small cafes or shops, utensils or packaging materials with a logo, uniforms and room design. In practice, an entrepreneur must receive all the conditions for doing business.

Famous companies include in the package ongoing legal and marketing support, advisory services and retraining of personnel on different stages. They provide support with government registration, health checks and reporting. This helps the branch to maintain momentum and develop actively.

Popular examples of franchising

Several hundred companies are actively working on the domestic market, which are constantly expanding their network through franchising.

Based on many parameters and the rate of economic growth, it is possible to compile a certain rating of brands offering a ready-made franchise business:

"Fix Price" - a chain of stores where goods are available at one price, already has 2050 outlets;
Pyaterochka is a retail chain with 6,200 supermarkets throughout the country;
Operator "Tele2" - a provider of communications and the Internet with 3,100 franchisees at the end of last year;
Network "KFC" - at high costs 30,000 outlets are already operating to launch a new cafe;
"33 Penguins" - a company that opens an ice cream parlor and focuses on visitors different ages(1312 establishments);
"Invitro" - independent laboratories offering a wide range of analyzes for affordable price(more than 700 branches);
"Sportmaster" - favorite stores of fans of an active lifestyle offer excellent conditions cooperation;
"Orange Elephant" - the most profitable children's franchise of 2015 quickly pays off and opened 360 branches in 9 years;
Ascona - furniture factory, whose products can be purchased at 600 points.

Among fast food and fast food chains, an offer to open franchise business You can discuss with representatives:

McDonald's - the most famous franchise requires a serious approach and large initial investments from applicants (more than 36 thousand establishments in the world);
"SUBWAY" - a fast food chain with the largest franchise and 43 thousand cafes in many countries;
Russian "Stardogs" - with affordable conditions for small businesses.

All these franchises are in our franchise directory!

Entrepreneurs who are interested in a franchise without investment are offered cooperation by small companies. They provide comprehensive services or retail goods: souvenir brand "Present Day", toy store "Your Bear" or transport company "Your Ticket". Their conditions and the cost of royalties are within the power of entrepreneurs who do not want to take loans or loans.

How to choose a franchise

Before purchasing a franchise, it is necessary to carefully study the demand in the region, assess the purchasing interest and solvency. It will be right to consider all the indicators in the future, so as not to crash after a few years of work.

An important issue is the reliability and popularity of the franchise partner. Good companies offer not only a trademark and equipment, but also continuous training, consultations and loyal financial conditions. The most comfortable will be cooperation with minimal intervention and control of work from the network.

Is it possible to work with several franchises at the same time

Until the last wave of the economic crisis, most established brands did not give entrepreneurs the opportunity to manage multiple business projects at once. It was believed that the franchisee will not be able to control and develop them successfully, will lead to bankruptcy. A significant slowdown in economic growth has led to the development of multifunctional franchising. Many companies began to cooperate with successful entrepreneurs who had experience in this system in other areas.

Experts recommend that one businessman work with no more than two franchisors at the same time. Proceed to the next case after establishing stable operation of the first branch. The option is more suitable for active and creative people who have free time and a team of like-minded people.

Can I get a loan for a franchise?

Such projects are approved by banks due to the presence of a well-defined business plan and economic strategy. Compared to self-employed businesses, franchisees close only 15% of the time. Therefore, banks are increasingly developing special programs adapted for this type of business.

Is it worth it to cooperate with a brand that has few representatives

The domestic franchising market is in search of new directions. Some companies do not have permanent offices in a number of regions. Therefore, buying a franchise from such a brand will bring a bonus in the form of a small number of competitors and sub-franchising in the future. New little-known brands can offer great conditions and minimal royalties to grow and gain momentum faster.