e-franchising examples. What is a franchise and how does it work

Hello, dear readers of the business magazine "site"! In this article, we will detail what is a franchise and how does it work , and also explain the essence of franchising in simple words.

Many, deciding to start their own business, are faced with such a form as franchising (franchise business). But aspiring entrepreneurs have little knowledge and a vague idea about this way of organizing their business.

From the article it becomes known:

• What is a franchise and franchising in business - what are their differences;
• What kinds and types of franchises exist;
• What are the advantages and disadvantages of a franchise business;
• What are examples of highly successful and profitable franchises.

The information presented in this article will be useful both for those people who are just thinking about starting their own business, and for those who want to expand their business.

So, let's begin!

Franchising and franchising: what is it, what is the difference, what are the pros and cons of opening a franchise business - we will talk about all this in this issue in simple and understandable words

The word "franchise" comes from the French franchise, which means "favor" And "privilege".

Franchise ( from English. A franchise is a type of agreement under which one party transfers and another acquires the rights to a business model, use of technology and trademarks.

This term also has a synonym - commercial concession , however, it is used less frequently.

1.1. What is a franchise in simple words - a description of the term + the principle of operation on a real example

If we reformulate this definition in such a way that it is even more understandable, then franchise is the purchase of a right to open a business under the brand name of a well-known brand. At the same time, they use not only a trademark, but also technologies - both production and sales, as well as the concept of doing business.

Thus, an actually ready-made business is bought, the payback and profitability of which have already been tested in practice.

Franchisor and franchisee - who is it?

The party that buys the right to sell goods and services under a certain brand is called franchisees. The party selling such a right is called franchisor.

How does it work in practice?

For example, someone Andrei would like to start working for himself and do business. For this, he either.

After collecting some money, Andrey decides to buy a fast food restaurant franchise. So he acquired the status of a franchisee.

Having organized such a restaurant in his city, Andrei soon began to receive income that he did not have while working for other entrepreneurs.

Now he can open a whole chain of such fast food restaurants in his city.

1.2. Related terms related to franchising

In order to better understand this issue, you need to know other terms that are directly related to franchising and franchising.

Despite the fact that in our country the first franchise agreements began to be concluded relatively recently, in the world this widespread practice - and there is generally accepted terminology that makes such contracts and relationships between franchisees And franchisor as clear and transparent as possible.

First of all, since a franchise is understood as the transfer of a license, you need to know what it is.

In this case license is the transfer of rights held by the franchisor (know-how, technology, software, etc.).

At the same time, know-how is any information (concerning production, product sales, business organization, etc.) that has commercial value, since it is known only to their owners.

That is, under know-how refers to the secrets of doing business or production, on which this or that business is built.

Documents by which the right to use a particular trademark is transferred and purchased can be called differently, while having the same meaning:

• franchise agreement;
• license agreement;
• commercial concession agreement.

When such a right is bought, the buyer (or franchisee) makes what is known as lump-sum fee is a payment for the purchase of a franchise . If we are talking about commodity franchising, then instead of paying a fee, the contract may provide for purchase of a specific inventory.

Often the contract is concluded in such a way that it is periodically required to be renewed. Then a lump-sum fee is paid each time the contract is renewed.

In addition to the lump-sum fee, the franchisee must pay royalty .

What is royalty in a franchise - a description of the term

Under royalty understand those payments that are periodic and payable throughout the term of the franchise agreement. These can be fixed amounts or a certain percentage of the business's profits.

In commodity franchising, periodic purchases of goods act as royalties.

When the contract is signed, the franchisee receives franchise package . It can be like in printed form, as well as in electronic. Such a package includes all the documents and materials with which the franchisee can easily and quickly start a business.

The franchise package must include:

• franchise policy;
• business management guide;
• corporate identity standard passport;
• all necessary legal documents.

Manuals necessary for the correct work of personnel, software, etc. may also be attached.

The franchisor is no less interested than the franchisee in making the set of documents as complete as possible - after all, the reputation and popularity of the entire business depends on the correct organization of the business under its trademark.

Franchisers who value their business reputation take a very responsible approach to the formation of a franchise package.

Take note!

A person who wants to become a franchisee and is looking for the most interesting offer can familiarize himself with companies offering to conclude a franchise agreement on the relevant resources with complete catalog of franchises .

You can always find information both about the companies themselves and about the cost of concluding an agreement, lump-sum and periodic contributions, the amount of investments required to start, as well as contacts where you can contact company representatives to discuss the details of the transaction.

A novice businessman can either simply purchase a franchise and open a business on it, or master franchise, according to which he will become the sole owner of the right to conduct his chosen business in a certain territory (for example, in a city, region, district, etc.).

"Franchise" and "franchising" - what is the difference between these concepts?

2. Is franchising and franchising the same thing or not?

Very often people who do not have an economic education confuse the concepts "franchise" And "franchising". But to be able to distinguish between these two concepts is necessary - especially for those who want to conclude a franchise agreement.

Under the term "franchise" means the very acquisition of the right to sell goods or services under a certain brand name.

Often the word "franchise" is replaced by "franchise package". Although, in fact, the franchise agreement is first signed, followed by the receipt of the company's franchise package. The composition of the franchise package is strictly specified in the contract and can be discussed when signing it.

Franchising: what is it - an overview of the concept in simple words

Franchising is the process of creating, building and running a business on the terms of a franchise agreement.

Thus, the franchise acts as the subject of relations between the franchisor and the franchisee, and franchising means doing business on the terms of the franchisor.

What are the franchises - 7 main types and types

3. Types and types of franchises - 7 main varieties

Since doing business under a franchise agreement has been used for quite a long time, several different types of franchises have developed. They may differ in the degree of involvement in business management by the franchisor, in the form of payment for the franchise agreement, in the place of manufacture of products that the franchisee sells, etc.

Thus, everyone who would like to work under a franchise agreement can choose the most suitable option for themselves.

Type 1. Classic or standard franchise

This is the most used franchise in the world. As a rule, such an agreement implies the payment of a lump-sum fee, as well as the presence of periodic deductions in favor of the franchisor.

At the same time, the franchisor has the right to control the process of doing business of the franchisee and make its own adjustments. It can also check the compliance of the business built by the franchisee under the license agreement with the requirements, rules and codes of the trade mark.

Type 2. Free franchise

On the territory of the Russian Federation, it is this form of commercial concession that has received the greatest use.

A distinctive feature of the free franchise- This is a low royalty rate and greater freedom of action for the franchisee.

Thus, the entrepreneur is practically not controlled by the franchisor and has the opportunity to run his own business and develop it independently.

Type 3. Import-substituting franchises

In recent years, due to the introduction of economic sanctions in relation to Russia, it has become increasingly popular purchase of import-substituting franchises . The demand for them is explained very simply - consumers in our country are accustomed to goods and products of European production, which are of high quality.

Since the import into our state and the sale of some of these goods and products is now prohibited, Russian entrepreneurs are striving to enter this market and offer consumers similar goods, but made in the Russian Federation.

Thus, when buying a franchise, the technology for the production of certain goods and services is acquired, and the production itself takes place on the territory of our country. This is very profitable and allows not only to provide our citizens with the things and products they need, but also to receive good profits from this.

Type 4. Silver franchise (turnkey business)

In this case, we are talking about buying really ready business, in the creation and promotion of which you do not need to invest time and money. The owner of a particular trademark independently opens a branch of his company in a particular city, and then sells this business to a franchisee. As a rule, in this case there are monthly payments - percentage of affiliate profit .

This is a very convenient way to start your own business for those who do not have much entrepreneurial experience. First of all, since there is no possibility of making a mistake at the stage of opening an enterprise, and the possibility of a created business not meeting the trademark standards is also excluded.

When buying a silver franchise, you can immediately start working and earning income.

Type 5. Business for rent

Some franchisors prefer rent a business. In this case, the benefit of the franchisee is that he does not need to create and build a business on his own, and the benefit of the franchisor is the ability to receive monthly income without spending time managing the business. By the way, we already wrote about that in one of our publications.

At the same time, the franchise agreement stipulates what percentage of the income the franchisor receives, and what percentage goes to the franchisee. This is a mutually beneficial cooperation and an option suitable for aspiring entrepreneurs.

Type 6. Golden franchise (master franchise)

Those people who already have experience in running a business and who want to work "big" can purchase the so-called "master franchise" .

By concluding such an agreement, the franchisee receives monopoly rights for business in a certain region or city.

Of course, the cost of such a license is very high, but in the future these costs will definitely pay off - after all, the entrepreneur will be able to open a network of companies in this region and remain the only representative of the trademark in the territory designated in the contract.

Type 7. Corporate franchise

This commercial concession agreement is ideal for inexperienced businessmen. It assumes that the brand owner will control the development of the business and be able to run it on their own terms.

Opportunities to make any changes for the franchisee are small. However, it will be easier for a beginner to learn how to do business under the guidance of an experienced team of professionals.

When choosing the type of franchise, you need to evaluate your financial capabilities, ambitions and experience in doing business. In any case, with such a variety of franchise types, there is always a way out - even for those with small start-up capital and experience.

Franchise business - the main pros and cons

4. Advantages and disadvantages of a franchise business

People who would like to become entrepreneurs by buying a franchise often ask themselves the same questions:

• how cost effective is it?
• Does it make sense to invest money, effort and time in franchising?
• What are the advantages and disadvantages of such a business?

To answer these questions, you need to think about pluses And cons starting a franchise business.

Pros (+ ) starting a business with a franchise

There are five main advantages of franchising for the franchise buyer.

Plus 1. Minimal risk when doing business

When an entrepreneur decides to start a business, there is always a chance of failure- the attractiveness of a product or service for consumers may be incorrectly assessed, etc. However, in the case of franchises, this is practically impossible- after all, a novice businessman receives complete instructions for successful business development.

As a result, if everything is done according to the instructions, the profit will not be long in coming. The path that the franchisee has to go through has already been traveled by the owner of the trademark - and it is guaranteed to bring income.

Plus 2. Brand recognition

A lot of money if a company is created "from scratch" , goes to its promotion and brand advertising. When it comes to a franchise, such expenses will not be required - after all, the trademark is already well known to potential consumers of a product or service.

In this case, the company already has a positive reputation, so the franchisee can use an image that has already gained people's trust and is known in the market.

Plus 3. Quick profit

Since there is no need for advertising and time to promote the company, the first profit will be received very soon after the opening of the enterprise under a franchise agreement. And it's not just beautiful words, A proven fact.

So, when McDonalds opened in Moscow, on the first day of its work several thousand people queuing up for this place before his discoveries.

Therefore, there is no need to worry about how to live the first time while the business is at the development stage - the first income will be received very quickly. In a separate article, we also wrote what ways to earn extra money are possible in your free time from your main job.

Plus 4. Minimal spending on advertising campaigns

The lion's share of expenses when opening any company falls on advertising. In addition, it is not so easy to find really good specialists who can attract the maximum number of consumers to the company. Moreover, success is largely determined by the extent to which it is able to retain its customers.

A franchise agreement allows you to avoid all these costs and headaches for a businessman. Franchisors supply their franchisees with a complete package of documents for starting and running a business, and this package includes complete recommendations for running successful advertising campaigns and all kinds of events.

Plus 5. Ability to receive support and receive training

Usually, starting your own business, a person finds himself alone with this situation. He has no one to ask for help or advice. When concluding a commercial concession agreement, everything is different - not only he himself is interested in the success of the franchisee, but also the owner of the trading network. That is why the franchisee will receive maximum support and, if necessary, complete training. As a result, he will be able to successfully conduct his business and receive the desired income.

In addition, most franchisors offer ongoing supervision and assistance from qualified lawyers in situations where such assistance is needed.

Thus, with the full support of the franchisor, the business will develop very quickly, and the franchisee will make a profit. But there are also disadvantages of starting a franchise business.

Disadvantages (− ) of Franchise Business

There are also five main ones.

minus 1. Lack of “self-maneuver” capability

As a rule, all actions of a novice entrepreneur are strictly regulated, and he must adhere to the rules and codes that the franchisor has provided him with.

A businessman does not have the opportunity to show his creativity in the conduct of his business - he must coordinate everything with the owner of the trademark.

Minus 2. The need to make periodic payments or purchase goods and equipment

If the entrepreneur does not work under a franchise agreement, then he can appropriate all the income for himself and spend it as he wishes. And the franchisee must make periodic payments(usually once a month) and, in some cases, purchase goods or equipment from the brand owner. This - additional expenses , which will need to be deducted from income throughout the duration of the franchise agreement.

Minus 3. High price for franchises

Despite the fact that starting your own business under a franchise agreement is much easier than without one, franchises cost a lot. This is especially true for well-known and promoted brands and master franchises.

Minus 4. Control by the brand owner

Not every entrepreneur will like that someone controls his every step. And it is impossible to avoid this control when buying a franchise. The franchisor will oversee all business processes to make sure that the franchisee is doing everything possible to extract maximum profit from the business.

Minus 5. The impossibility of applying a creative approach

The franchisee has no right to independently choose the direction of development of his business or show creativity in the development of marketing and other programs. It must strictly follow the development program proposed by the franchisor.

Thus, franchising, like any other form of business, has not only advantages.

The table below lists the main criteria (parameters) for comparing the opening of a franchise business and a traditional business:

№	Comparison options	business as usual	franchise business
1	Business development timeline	Months and years (-)	Several weeks (+)
2	Risks	High (-)	Low (+)
3	Initial investment	Large (-)	By agreement (±)
4	Support and help	Absent (-)	Available (+)
5	Advertising expenses	High (-)	Low (+)
6	Freedom to do business	High (+)	Low (-)

The table shows that the main differences between a franchise business and a “regular” traditional one are the timing of business promotion, advertising costs, risks, initial investment of funds and freedom to do business.

Popular franchises for small and medium businesses

5. TOP 5 franchises for those wishing to become a franchisee

Before deciding to conclude a franchise agreement, you need to look at real examples of such a business. It is worth paying attention to the companies included in TOP-5 the most popular brands offering the conclusion of such an agreement.

1 place."McDonalds"

This company is known, without exaggeration, all over the world. The owners of this company came up with the idea of ​​franchising, deciding to beat the competition and expand their catering chain outside of America.

However, when thinking about acquiring a franchise from this company, you need to prepare for a significant investment at the initial stage. To start this business, you need not only to purchase a franchise for 45 000 dollars, but also have an initial capital of at least 950 000 dollars. Not every novice businessman can afford it.

Most often, franchises are bought by wealthy businessmen as an investment.

2nd place. Popular chain of supermarkets "Perekrestok"

These supermarkets sell products for those who prefer high quality, freshness of products and good service. But in order for this franchise to bring its purchaser a stable good income, the supermarket must be located in a busy and densely populated area of ​​the city, have parking and convenient access roads.

In addition, the franchisor places high demands on the area of ​​the premises in which the supermarket will be located, on internal communications, lighting, and even on window dressing.

3rd place. Subway Restaurant

This is an ideal option for start-up entrepreneurs, because the cost of the initial fee for a franchise agreement is 7 500 dollars. In addition, the franchisor is happy to provide its partners with various bonuses and benefits, reduce the lump-sum fee and provide comprehensive support in resolving legal and marketing issues.

It is for these reasons that the network of these restaurants in Russia is constantly growing. Currently operating approximately 700 such restaurants in different regions of the country.

4th place. "Coffee to go"

Coffee to go coffee houses deservedly occupy the fourth place in the ranking. Since the cost of a franchise is only from 100 to 400 thousand rubles. Many people who want to open their own business on the basis of a franchise agreement opt ​​for this particular brand.

In addition, this is a very popular destination, because there are more and more lovers of high-quality and delicious coffee, as well as those who spend most of the day on the run and cannot stop at a cafe to drink coffee.

5th place. "Orange Elephant"

In fifth place in the TOP-5 is the franchise of the chain of stores with goods for children's art "Orange Elephant". The dynamics of the development of these stores is impressive, in addition, this network has not yet been promoted to the maximum and is not present in all cities. And this means that franchisees have a greater chance of success with relatively little competition.

At the same time, the network not only sells, but also manufactures goods for children's creativity presented in its stores. Today the network has franchisees in America, Turkey, Israel, Iceland and many other countries.

Thus, each novice merchant can choose the franchise that is right for him - both in terms of the specifics of the activity, and in terms of cost and requirements for initial capital.

6. FAQ - frequently asked questions regarding franchises

There are questions that are asked most often by those who wish to conclude a franchise agreement.

Question 1. How to choose the right franchise?

First of all, you need to decide on the amount that the entrepreneur is willing to invest in his business at the initial stage. Today you can find both inexpensive franchises and those that require very large financial investments.

There is no need to overestimate your capabilities, because the success of a business largely depends on this.

Having chosen several franchisors in the right price category, you need to study all these brands and answer the following questions for yourself:

• what are they doing (what goods or services are offered);
• what is the policy of these companies;
• what kind of advertising they do.

Based on this, you need to focus on one company - the most suitable for its specifics. This is very important, because a businessman should be happy to deal with his “brainchild”. There is no point in turning into the business of your life what you do not have a soul for.

Then you need to contact the representatives of the company and discuss all your questions regarding the conclusion of the contract. If everything suits you, then the deed is done and the franchise has been chosen.

Question 2. Is it worth opening a franchise business if there is no experience?

One of the main benefits franchising is that it allows you to open your own business, even for those who had nothing to do with the business before.

It is safe to say that in the case of a franchise, the risks for the entrepreneur are minimal. This is due to the fact that, after the conclusion of a commercial concession agreement, the trademark owner (franchisor) provides the novice merchant with a business plan and detailed instructions for creating and promoting a business. By the way, you can in one of our previous materials.

Thus, the franchisee not only receives a guaranteed income in the very near future, but also invaluable business experience.

Question 3. How much does a franchise cost and what does its cost depend on?

The cost of concluding a franchise agreement can be different.

The price depends on several factors:

• brand promotion;
• type of franchise For example, a master franchise will always cost much more than a standard franchise - but it will also bring large incomes);
• ambitions of the brand owner.

In addition, you need to take into account lump-sum and periodic payments in favor of the franchisor - they can also be attributed to franchise costs.

There are franchises For example, "Orange Elephant"), which stand relatively inexpensive, do not require very large material investments at the initial stage, but quite profitable for your own business.

And there are others, such as, for example, a franchise of a KFC fast food restaurant, where the initial payment is from 47 thousand dollars, and investments from 700 thousand $.

KFC restaurant franchise

Question 4. Is there a franchise without investments?

Turnkey business without investment- this is probably dream any budding entrepreneur. But is it possible to realize this dream?

Indeed, there are companies that offer to conclude a franchise agreement without the first - lump - sum payment. However, this does not mean that the business does not need to invest money. Franchisees will have to invest their own funds in building or renting premises, ordering advertising campaigns and paying salaries to employees. Thus, it is unrealistic to completely avoid costs at the initial stage.

In addition, any franchisor will require royalties, which are usually around 10 % of franchise income.

Therefore, in any case, you must not forget about the necessary expenses. But in the case of a franchise, the business will really pay off much faster than a regular one.

Question 5. What franchise business can be opened in 2019 with minimal investment?

When deciding to open your own business under a franchise agreement in 2019, you need to remember about five most popular destinations , which are more likely to bring quick income:

• Internet sphere;
• the service sector and the provision of services;
• catering industry;
• trade;
• production.

There are franchises that are promising and promise quick profits to their franchisees:

• Multiwindows- a company that sells windows from different materials; initial payment - from 100 thousand rubles.
• TicketCom- a company that puts advertising on checks that are issued to customers when paying for purchases in stores; initial payment - from 150 thousand rubles.
• linguitania- a network of centers for the study of foreign languages, a lump-sum fee - 220 thousand rubles.
• STARDOG!S– catering outlets that sell hot dogs. The lump-sum contribution can range from 22 to 330 thousand rubles.
• Gift Calendar- a network that sells souvenirs and accessories for the holidays, requiring initial capital in the amount of 790 thousand rubles.

P.S. You can also check out profitable ones for beginners in one of our articles.

7. Conclusion + related video

Thus, concluding a franchise agreement - a real and fairly easy way to start your business from scratch. It is especially suitable for those who do not yet have experience in creating and managing a business.

In addition, in the process of organizing and running such a business, you can learn a lot from more experienced businessmen - brand owners.

Many successful entrepreneurs today started out by buying a franchise - and they were not mistaken with their choice. Anyone can do this, even without having a lot of money for a down payment!

The RichPro.ru team wishes its readers success in all their business endeavors! We are waiting for your assessments of this material, comments and thoughts on the topic of publication in the comments below. Thank you in advance!

Franchise - what is it in plain language

Today, many entrepreneurs are ready to buy a franchise. It provides an opportunity to start a business that is already firmly on its feet.

In addition, his activities will be supported by professional support from the franchise seller. This type of activity is especially convenient for beginner entrepreneurs.

So, a franchise is a form of agreement between an entrepreneur or a group of people and a franchise seller or trade group for the right to commercially use a trademark, brand and professional advice in the development of this business.

In other words, a franchise provides an opportunity to receive a set of benefits for a legal entity or an individual for the use of the brand, copyright developments, and the franchisor's business model.

Franchises can be:

• trademark;
• business technology;
• intellectual property and its varieties, including software on computers;
• the rights and benefits received by the party selling the franchise.

In very simple terms, a franchise is the use of a brand (trademark) to sell your services or your own goods as a tenant. The franchising system has established itself at a high level, as an opportunity to promote a business quickly and professionally.

Some statistics

Statistics say that the franchising system enables an entrepreneur to overcome five years of company development by 80% at once and, at the same time, receive high profits.

The same statistics show that the bulk of independently promoted businesses barely make it to the two-year milestone. By purchasing a franchise, the buyer obviously wins, getting a profitable business.

The franchisor (franchise seller) is interested in the successful development of the sold franchise, as he also benefits from this. The buyer of a franchise is called a franchisee, and the system for promoting this service is franchising. Brand rights are not free.

They have a predetermined price, with the expectation that both parties benefit. Franchise Cost When a trademark is leased, a lump-sum fee is paid, which is a one-time fee. It is not refundable, but serves as confirmation of the right to use the franchise.

Usually, 8% of the turnover is paid monthly to the brand owner. This royalty is analogous to rent.

A component of success in this type of activity is information support from the franchisor for business investment. When opening a business, there are practically no beginner businessmen who are able to adequately assess all the upcoming costs and correctly invest their investments in development.

The franchise seller usually has more than one branch, a wealth of experience, and can name the exact cost of starting a particular business. Of course, in addition to royalties and a down payment, the entrepreneur bears the costs of equipment, rent, advertising and wages.

What are the benefits of a franchise?

As they say, every case has two sides of the coin - pros and cons.

Benefits of a franchise include:

1. Recognition and promotion in the market of the trademark provided for rent.
2. High speed of becoming your own business.
3. Business training to avoid business mistakes and bad experiences. However, in order to successfully run a business, it is desirable to already have some experience and entrepreneurial skills.
4. Consulting and other professional support of the franchisor.
5. Significantly lower costs for advertising and paraphernalia. The entrepreneur receives recommendations about advertising slogans, colors, company attributes from his franchisor. There are also such companies, when concluding an agreement with which, a novice entrepreneur even receives equipment.
6. Its cost is included in the lump sum payment. There are also franchise sellers who are interested in developing their brand and support franchisees in advertising, even placing it on television and radio.
7. A clear territorial delimitation, which makes it possible to remove the threat of competitors owning the same franchise. An independent entrepreneur cannot know for sure where to expect a blow from competitors.

Franchise Disadvantages

To purchase a finished brand you need to fork out. Franchise fees are often high. Especially when it comes to the exclusive right to a brand within the same territory (region, city).

In such cases, the lump-sum contribution is very large. But this gives the right to be the only businessman legally using this brand in a certain territory. Another inconvenient moment is the very strict conditions for doing business (certain requirements).

The franchisee may be in a very narrow framework. And this is understandable, since the brand owner does not want to lose his reputation and ruin his business.

The franchise business emerged as a response to the need to develop the market that arises for any successful company. To achieve maximum profit, you need to be able to promote the product and make the brand popular. This can be achieved by using effective tools to stimulate numerous entrepreneurs who are ready to dive into the world of business, but do not know where to start. A franchise business involves partnerships, for which the head office initially sets the conditions, while others are forced to obey them. Franchising is currently a fairly broad concept, involving several varieties of cooperation mechanisms. They are united by the fact that they meet the modern requirements of market relations and are aimed at mutually beneficial interaction.

A partnership for mutual benefit

As can be seen from a typical franchise agreement, such interaction enables a novice entrepreneur to master the intricacies and wisdom of the chosen business area, as well as a specific product, without investing too much money and effort into it. The head office, by granting a franchise, at the same time gives all the tools, access to extensive information, on the basis of which the enterprise can function effectively from the very beginning. Many contracts also stipulate that it is the franchisor who selects the personnel for the initial stage of the operation of the new branch.

An enterprise operating on a manufacturing franchise can, with minimal risk, assess how productive, promising and profitable the area of ​​interest is. As a rule, you need to pay an entrance fee and spend some money on the initial equipment of the workspace, but these expenses are much less than in the case of starting a business from scratch. Today it represents a simple and effective way to enter the business.

Commodity franchise

As can be seen from the reviews of the franchise, this option (according to many entrepreneurs) is one of the most profitable. An alternative name is distribution franchising. The workflow involves relationships through the product.

The terms of the franchise in this case imply the presence of a manufacturer that provides a particular entrepreneur with the opportunity to work with his products. At the same time, the enterprise must use the original brand and comply with the rules of the game established by it. As you can see from the reviews of franchises, this logic is quite simple to work with, which is largely due to the large amount of accumulated information about successful strategies.

Historical background

Franchises have been known since the nineteenth century. The pioneers in this area were American entrepreneurs. At that time, Singer sewing machines had just begun to be manufactured, and the manufacturer granted several companies the right to sell their goods in a territory strictly agreed upon by agreement. At the same time, the obligatory condition was the preservation of the name of the manufacturer. In addition, this type of franchise involved the service of goods provided by the forces of sellers. For Singer, this approach to business allowed them to expand their sales geography and achieve worldwide fame.

Over time, profitable franchises began to appear on the business market more and more often. For example, the experience of the union of grocers "Despar" is indicative. It united suppliers and sellers of agricultural goods in Germany in the first half of the twentieth century. As practice has shown, profitable franchises require a careful approach to the development of the store concept, access to which can then be sold. The use of the concept was beneficial for both parties: both the authors and those who joined the kind of franchise.

Everything flows, everything changes...

Modern types of franchises are quite different from those transactions that were concluded two centuries ago, at the same time, the essence of cooperation remains the same. There is a manufacturer who owns the rights to the product, and there is an entrepreneur who wants to work with this product. Commodity franchising involves working under the guise of a manufacturer, using its reputation and starting a business with minimal investment.

What is a franchise in simple words? This is such a transaction, at the conclusion of which the entrepreneur receives from the supplier an assortment matrix, a store concept, a product, and often also staff for the first time of work. It is the responsibility of the entrepreneur to work under the trade mark of the franchisee. What is (in simple words) doing business according to this scheme? Most often - the sale of clothing, food, shoes.

Terms & Conditions

Franchises for small businesses provide an opportunity to become part of a large holding with minimal investment. At the same time, the manufacturer is increasing its brand awareness, as well as the volume of transactions, which leads to financial prosperity. Many companies require their partners to keep the volume of transactions at a minimum level, and when this amount is exceeded, they give bonuses and make profitable offers. As a rule, franchises for small, medium-sized businesses assume that the entrepreneur adheres to the standards, service rules, and the level set by the main office. If corporate ethics is not observed, if the service level is not high, you can easily lose the privilege to work under a well-known name.

Thanks to rather tough but favorable conditions for cooperation, franchises for small towns without investments become a way of access to the entrepreneurial sphere for those who have a desire, but do not have large cash reserves and special education. The product offered by franchising is well recognized by buyers, which means that an influx of customers is ensured only through the advertised brand, without any effort on the part of the franchise buyer himself. At the same time, the owner of the franchise of a pharmacy, clothes, products receives a high-quality product within a strictly agreed time frame and at a favorable price. The supplier and the seller are all interested in the profitability of the enterprise, which encourages them to work together, efficiently, and productively.

Alternative option

In many cities, bakeries and confectioneries literally spring up like mushrooms after the rain. Many of them are also franchised. The manufacturer allows the company to work under its own recognizable name, provides baking products, production facilities and a well-functioning, well-thought-out scheme for implementing and attracting a client. The entrepreneur, paying the amount due under the contract, must simply maintain the point in working condition.

As can be seen from the described scheme, the company daily sends semi-finished products to the bakery, from which the staff makes buns and cakes so desired by customers. Since the place operates under a well-known name, the potential client has no doubts about the quality of the product and boldly goes to spend money, even if the price of (for example) bread is higher than in the supermarket.

Goods and services

According to the scheme described above, you can buy a franchise of a pharmacy, clothing store, confectionery or even a restaurant. But not everyone wants to work with the goods, so franchising provides the opportunity to provide services in a similar way. A service franchise is also sometimes referred to as a business franchise. Partners conclude a deal regarding the intellectual property of the head office. This assumes that the supplier has some licenses that allow him to work in the selected category, and the right to use these licenses is transferred under a franchise agreement.

Service franchises are presented in abundance on the Internet - these are a variety of sites. Beauty salons and fitness rooms work according to a similar logic. In some concepts, it is assumed that the franchise buyer is only looking for a client, and the services are provided almost entirely by the head office. This scheme is common among medical enterprises, especially laboratories. The entrepreneur opens a service point where he receives biological material from the client, sends it to the research area of ​​the head office, and then transfers the received data to the client.

Terminology and differences

It is far from always possible to immediately figure out whether a franchise belongs to the category of commodity or service. Much depends on the specifics of a particular zone and on the rules that the head office imposes on cooperation. Many are building franchising on a mixed interaction model. A classic example is McDonald's fast food restaurants. By purchasing a franchise, an entrepreneur gets not only access to the brand, but also to the processes taking place within the company. For dishes, semi-finished products are supplied, the head office trains staff, provides unique technologies for the manufacture of the product and offers a number of other specific benefits. A partner who has acquired a franchise must be engaged in maintaining the image, attracting a buyer, selling goods, servicing the client directly sitting at the table. In fact, we are talking about both commodity and service cooperation.

However, the concept under consideration is much broader than it seems at first glance. There is also a conditional and unconditional franchise. This terminology is used not even in building your own business, but in the insurance field. A certain compensation scheme is supposed to be paid in the event of an insured event. Royalty is paid under the contract in a fixed amount, and conditional depends on the specifics of the situation.

Classification: why is it needed?

The described division of the franchise system into several groups makes it easier for a potential businessman to master this area of ​​mutually beneficial relations between companies. There are a huge number of franchising assumptions on the modern market, and pitfalls, features of a particular transaction are not always visible at first glance. On the other hand, only the right choice can be the key to successful business. This means that you need to carefully both study the franchise classification system and determine which option is best in a particular case.

It is important to remember that business concepts for different franchise classes are quite different in nature. At the same time, the idea is the same for everything - there is a certain head office, whose brand should be promoted, and there is a novice entrepreneur who is not ready to create a business from scratch. In exchange for financial gain, he is given all the opportunities to create a business under an already well-known name, that is, one that exactly matches the wishes and requirements of customers. When accessing intellectual property through a franchise, it is important to assess how valuable the information is and whether it is worth working with. Franchise offers often look very attractive, but in practice are much less profitable than advertised. The quality of the initial concept determines the success of a businessman.

In the Russian market, there is also the following division of relations in the field of franchising:

• marketing;
• service;
• production.

Service and franchise

Having decided to enter into such a business, the entrepreneur receives from the franchise seller all the necessary information on the chosen area. Often, this is how real estate agencies are opened, and the head office maintains a common database, one for several regions, and individual offices receive unlimited access to it for a specified amount. The main task is to find a client and keep the information in the database up to date.

Franchising is quite widespread in the field of car rental and the provision of services for cleaning, loading, unloading goods, and moving. The ability to use the head office is combined with access to a popular brand, which makes getting into business simple and straightforward.

Production and franchise

For a certain amount specified in the contract, the entrepreneur receives from the head office all the equipment, personnel and opportunities for setting up his own production process. Instructions for the use of machines, for training of personnel are attached. The head office conducts trainings, thanks to which a novice entrepreneur can immediately create high-quality products that meet current standards and customer expectations.

For the head office, this type of franchise is one of the most convenient. The enterprise is only engaged in providing information, machines, but the direct work falls entirely on the one who acquires the franchise. With minimal costs and investments, there is an opportunity to maximize profits.

Sales and franchise

In this variant of cooperation, the head office assumes numerous functions - it also provides the entrepreneur entering the network with the necessary equipment, often personnel and retail space, and also produces all the necessary goods itself. The task of an entrepreneur who has acquired a franchise is to find a client and sell the goods, serving the buyer at the highest level. This option is more difficult for a franchiser, but easier for someone who is just starting their first business.

Where to start work?

When choosing the best franchise for yourself, it is important to analyze several factors. First of all, you need to understand how much money a novice entrepreneur is ready to invest in a business, and also figure out which work scheme from those described above is most suitable. Currently, on the vastness of the virtual web, there are many directories of enterprises from which you can buy a franchise. Knowing the area in which the potential buyer of franchising is best oriented, as well as imagining the conditions under which it will be more convenient to work, you can choose the best option for yourself.

Most often, franchising open stores selling clothes, shoes, as well as ice cream shops, grocery stores and pastry shops. And yet it’s worth trying yourself in what the soul lies in, even if it is a non-classical area for franchising. It is important to assess the level of competition, as well as the availability of suitable space in your city. If a business is started in a small town where there are already representatives, for example, fast food restaurants, a similar outlet is unlikely to lead to success. Please note: some businesses set limits (for example, no more than one point of sale, store, restaurant per location).

Almost every day we come across franchises: we visit coffee shops under a familiar sign, go grocery shopping under a federal brand and buy clothes and shoes of our favorite brand - most of these business projects were opened under a franchise.

In a broad sense, a franchise is a business concept that allows you to open your business from scratch under a well-known brand.

Why is this model so popular? This is because entrepreneurs are increasingly opting for proven concepts that avoid mistakes and guarantee business profitability. For this reason, there are more and more franchising enterprises, and consumers, in turn, get used to it and feel more comfortable choosing a familiar brand. Such customer loyalty allows you to count on the success of a franchised business.

Most likely, the concept of "franchise" is already familiar to you. Nevertheless, there are few people who understand the whole essence of this term. And only a deep understanding of the whole essence of this word will help you understand whether it is worth opening a franchise business and how to choose the right business model that works.

In fact, a franchise is the same product as a product in a store, which has its own distinctive features and individual qualities, such as a trademark, logo, business technology, etc. Therefore, in order to explain what a franchise is in simple terms, we will compare starting a franchise business with buying a car in a showroom.

Where do you buy a franchise?

"Franchise stores", as well as car dealerships, there are a great many. All of them are on the Internet. If we talk about offline, then you can communicate personally with franchisors (representatives of companies developing by franchising) at various specialized exhibitions. But, first of all, it is worth considering all the offers on the Internet.

There are many websites with franchise directories, but not all of them provide really up-to-date and verified information. In principle, you can check the franchise you like on your own: you just need to call the franchisee (businessmen who have already opened a business under this franchise) or look at the reviews on the sites. But in any case, you should also be guided by expert opinion: for example, view the franchise rating on the site, which contains the most popular and proven franchise offers on the Russian market.

After you have decided on a platform for choosing a franchise, you should understand on what basis you will choose a model for your future business. Let's take a look at this process with a simple example.

Distinctive features of the "product"

Before making a choice in favor of a particular car, we think: why do we need a car at all? Driving out of town or to work, driving children or driving alone - the purpose of the car determines its type: it will be a jeep or a minivan, or maybe a small city "runabout".

So it is with a franchise: in order to choose a business that meets your needs, you need to decide on the criteria by which you will choose a “product”.

Perhaps you have experience in a particular field or you just want to try yourself in a new business. You can also proceed from the amount of investment, if you have a small start-up capital, then you need to look. There is an opportunity to combine entrepreneurship with work, for this there are .

The world of franchising is quite diverse, so choosing a business model that is right for you will not be difficult. The main thing is to be honest with yourself and choose the "car" that you really need.

After determining the criteria by which you will select a franchise, you need to choose a “brand” of the product, since each company developing a franchise direction tries to make its offer unique and unlike its competitors, so it’s worth talking to each “seller” who interested you in the franchise personally .

Seller's advice

To do this, you should find the contacts of the franchisor or fill out the feedback form. This does not oblige you to anything, but you can find out all the information you are interested in. A representative of the franchisor will be able to explain the essence of the business concept, talk about the benefits of opening a franchise business, and clearly answer about the profitability of the business and the full cost of the “goods”.

"Service maintenance"

There are groups of goods, such as, for example, cars, upon the purchase of which the seller undertakes to provide the so-called "pre-sales" and "after-sales" services. These options may not be included in the standard package when buying a car, or they may have certain nuances for their existence.

In the case of a franchise, the initial or lump-sum fee is usually taken by the franchisor for the fact that he not only provides you with the opportunity to work under his own brand, but also trains staff, selects premises and advises on any issues that arise in the process of work. That is, the franchisor essentially offers a franchise service.

If you are really interested in a business product, and you are ready to purchase it, then the franchisor company may ask you, as a potential franchisee, to fill out a questionnaire and answer a few simple questions. This moment is one of the stages of the deal to acquire a franchise.

The process of buying a "product"

The most important moment in the transaction is the conclusion of the contract. The concept of franchising does not exist in Russian legislation, so many franchisors and franchisees cooperate on the basis of a commercial concession agreement. If you are offered to work by concluding a simple contract for the supply of goods, then you should think about whether the offer you are interested in is really a franchise.

The commercial concession agreement provides the franchisor with the opportunity to transfer intellectual property objects (trademark, logo, know-how) on favorable terms, without fear for the safety of his "property". Also, such a document allows the franchisee to receive all the benefits of cooperation and be sure that the business model of the franchisor really transfers to him all the knowledge and skills in the chosen business area.

That is, a simple supply agreement does not guarantee you the right to provide a brand in your city, and at any time you may be asked to change the sign and remove the trademark owned by another company.

Therefore, the conclusion of the contract is the most important moment of buying a franchise, treat it with all responsibility: check whether the brand and other intellectual property of the franchisor is registered with Rospatent, and also communicate with the franchisee about the fulfillment of obligations by your future partner.

The document must contain all the financial obligations of the parties and the terms of payment. Many franchisors provide the opportunity to defer payment of the lump-sum fee: you pay half when signing the contract, the rest after fulfilling the obligations specified in the commercial concession agreement.

Franchise is the right to sell, granted to an individual or group of individuals in the market of goods or services, within a certain territory. Some examples of popular franchises today are McDonald`s, Subway, Pizza Domino.

There are many different types of franchises. Many people associate franchising with catering only. In fact, there are over 120 different types today, including in service, health and fitness, financial services, and the like.

How Franchising Works

If you're thinking about buying a franchise, it's important that you understand exactly how franchising works, what the fees are, and what the franchisor expects from you.

A person who buys and operates a franchise is called a "franchisee". The franchisee buys the franchise from the “franchisor”. The franchisee must follow certain rules and guidelines set by the franchisor. In most cases, the franchisee must pay an ongoing fee, called a royalty, as well as an upfront, one-time lump-sum payment.

Franchising has become one of the most popular ways of doing business in today's market.

History of Franchising

Franchising started back in the 1850s when Isaac Singer invented the sewing machine. In order to distribute his machines outside of his geographic area, as well as provide customer training, he began selling licenses to entrepreneurs in different parts of the country.

In 1955, Ray Kroc began franchising food service and built the world's most successful fast food chain, now known as McDonald's. McDonald's currently has the largest number of franchised businesses worldwide.

Today, franchising helps thousands of people own and operate their own businesses. Franchising allows entrepreneurs to be in business for themselves, but not by themselves. There is a statistic that the likelihood of success is much higher if a person starts his own business under a franchise, as opposed to starting his own business from scratch.

Benefits of buying a franchise

Some of these benefits are:

• Corporate image - the image and brand awareness of the company. Consumers always buy better if they know the name of a company they trust.
• Training – The franchisor usually provides extensive training and support to the franchise owner.
• Save Time – With a franchised company, there is already a business model in place so you can fully focus on running a successful business.

There is a reason why franchising has been around for decades. This is a great way for individuals to own and manage their own business.

Now that you have an idea of ​​what it is and if you are thinking about buying one, do a thorough research of the company and consult with a franchise consultant before making your final decision.

What to look for when buying a franchise

1. A franchise must have a certain uniqueness in terms of products, services, markets, investment level.
2. Ease of Operation: The franchisee should be able to learn how the franchise operates in a fairly short period of time.
3. The franchise concept should adapt well to different locations and markets, with high demand for goods and services.
4. Should have a good return on investment and a quick profit after starting a franchise.
5. The franchisor must be represented by a strong management team.
6. The franchisor must have a good reputation and a successful history.
7. The business must be learnable, there must be good learning systems and procedures that are well documented.

Possible moments that should alert you.

1. The product or service has a short lifespan.
2. Gross margins are too low and fees are high to support franchise royalties and others.
3. Franchise skills are complex and/or take a significant amount of time to master.
4. Weak professional support.
5. A franchise requires unique market characteristics that are not easy to find. Thus, a business location has very specific requirements.
6. Franchises have very complex and detailed audit requirements.
7. Franchises from others, such as franchisees, are not successful or have little success.

Franchising terms

Broker - an independent specialist who acts on the market on behalf of the franchisor, selling (transferring) to the last found customers (users) on a paid basis, but on the condition that the user must independently evaluate the terms of the franchise.

Franchising (commercial concession) agreement is an agreement that reflects the essence of the franchise program, which contains a number of conditions: on the business concept, the business itself transferred to the user, initial fees, rights granted to the user.

The second part of the agreement contains conditions on the rights and obligations of the parties (right holder and user).

This is a document provided by the copyright holder to the user, which contains all the information about the company.

Marketing services- marketing and advertising services provided by the franchisor for a separate, constantly charged fee. Typically a % of gross sales or a fixed recurring fee.

International Franchise Association is a private, non-profit organization located in Washington, D.C. that serves as the world's center for the exchange of franchise information and franchise promotion.

Franchise Package- a term used in franchising to refer to the entire package of services or conditions offered by the franchisor to an actual or potential franchisee. The Franchise Package covers all the main issues set out in the Franchise Agreement and the list and description of the main services that must be provided by the Franchiser in accordance with the Franchise Program.

Initial (lump-sum) franchise payment- the initial, preliminary payment of the user to the right holder for the right to carry out franchising activities.

The money paid compensates the right holder for the costs of the time, effort, money of the right holder that were spent on building the concept of the franchise, attracting and working on the approval of future franchise users, their training and supporting franchise users in their business establishment activities.

Onsite support– support provided to the franchisee by the franchisor through phone calls, personal visits and regional meetings.

Potential franchisee- an entrepreneur, a company whose actions are aimed at preparing for franchising activities (purchasing a franchise).

Russian Franchise Association – a non-profit organization founded in 1997 by the leaders of Russian franchising to support and protect the interests of its members and to create a more favorable legal and economic environment for the expansion of franchising in Russia.

Royalty- periodic payments to the franchisor, which are usually calculated as a percentage of sales, but some types of franchise agreement (especially in the service sector) provide for fixed monthly payments.

These payments compensate the franchisor for the costs of ongoing support of the franchisee's activities, research and business development work, along with this, they are the main source of income for the franchisor. Therefore, it is advisable for the franchisor to work closely with each franchisee in order to make the business the most successful, because. each of the parties in this state of affairs has the right to count on profit.

Contract timecommercial concession (franchising) – usually a five-year initial term of the franchise agreement is set with the possibility of its extension.

This in turn depends on the following conditions:

1. fulfillment by the user of all financial obligations,
2. conducting business strictly within the framework of the franchise concept and an agreement to bring the fixed assets of production to current business standards.

In this case, a payment for the prolongation of the contract may be established.

Sub-franchisor (Master Franchisee)- a party that is between the franchisor and the franchisee and has the right to resell the sub-franchise in a certain territory. The term is often used in international franchising.

Territory of using the complex of exclusive rights (Exclusive Territory) – Franchise business is usually limited geographically. If the user's activity involves movement, then he is endowed with a set of exclusive rights within a single geographical unit, sufficient to ensure the potential for growth and development.

The franchising system can be weakened by the presence of a large number of users in one market, however, on the other hand, such a concentration of users can lead to synergies and market dominance, which will eliminate competition and profit from joint marketing activities.

Trademark – the name, symbol or other means of identifying a product/service, which must be officially registered and legally restricted in use by the copyright holder or manufacturer.

Franchisor- a commercial organization that provides a set of exclusive rights to a business entity in order to conduct its business under its trademark.

Franchisee- an entrepreneur or investor who, through initial investment and subsequent payments (royalties), acquires the right to use a set of exclusive rights of the copyright holder, following his special recommendations for doing business.

Branch system franchisees A person, partnership or corporation that buys the rights from a franchisor to operate a business in a particular area and manages all franchised businesses independently. In such agreements, there is usually a clause on the development of the territory. If the affiliate systems franchisee does not comply with these requirements, the franchisor may resort to some measures.

Franchising- a method of doing business in which the copyright holder company grants the business entity (user) the right to use a set of exclusive rights (trademark, know-how, and so on) for the purpose of advertising, distributing, selling goods and services of the copyright holder that have become known on the market .

Business format franchising- The franchisor licenses the franchisee to conduct business under his own name and provides a complete basis for the franchisee's activities.

Franchise– the creation or continuation of a relationship between the Franchiser and the Franchisee or Licensee, in which the Franchisor supplies the Franchisee with marketing or industrial technologies, including Brand Names, in exchange for a certain fee, made on a regular basis. Also used in casual speech to refer to the Franchisee's business point.

Turnkey Franchise– territory provided and sold to the user (franchisee) fully equipped with equipment and ready for further intended use.

Royalty efficiency- the point at which the franchisor's operating expenses are fully covered by royalty income received from existing franchisees.