Main types of franchises. Types and types of franchises in business - we understand the very basics Turnkey business

Franchising is, as a rule, regulated by Chapter 54 of the Civil Code of the Russian Federation. Under a commercial concession agreement, one party (the copyright holder) undertakes to provide the other party (the user), for a fee for a period or without specifying a period, the right to use in the user’s business activities a set of exclusive rights belonging to the copyright holder, including the right to a company name and (or) commercial designation copyright holder, to protected commercial information, as well as to other objects of exclusive rights provided for in the contract - trademark, service mark, etc.

In Russia, franchising does not always imply the use of an agreement, an example of which is presented in Appendix 1 in Figure 22, a commercial concession based on its legal framework. Within the framework of franchising, the following agreements can be concluded: a commercial concession agreement, a supply agreement, an agency agreement, licensing agreement, trade credit agreement, safekeeping agreement, purchase and sale agreement, and a number of others.

Franchise is the right to carry out certain economic activities using the franchising principle, secured by a contract, agreement, as well as activities (production, provision of services, etc.) carried out using the franchising principle.

Franchisor - physical or entity, offering for sale agreements on a franchise basis and ensuring, on its part, compliance with the terms of such an agreement.

Franchisee is an individual or legal entity acting in accordance with the acquired franchise.

A franchise agreement is an agreement under which one party (the copyright holder) transfers to the other party (the user) for an appropriate fee and for a certain or indefinite period the rights to use a company name, commercial information, trademark, service mark, etc. The parties to a commercial concession agreement may be legal and individuals registered as individual entrepreneurs.

Lump-sum payment - a one-time remuneration to the franchisor in the form of a certain amount firmly fixed in the contract (agreement), which is established based on estimates of the possible economic effect and expected profits of the franchisee based on the use of the franchise, can also be calculated as payment of the franchisor's costs associated with the sale of the franchise;

Royalty is a remuneration in the form of periodic payments of fixed rates determined by the franchisor based on its own assessment of the value of the right to use trademark unified franchise network, which are paid by the franchisee to the franchisor on a monthly basis.

There are three main types of franchising, all of them are presented in Figure 5

Figure 5 - Types of franchising

Product franchising is the sale of goods produced by the franchisor under a registered trademark. The franchisee, as a rule, provides after-sales service (“Econika Shoes”, “Red Cube”). This type of franchising is sometimes called “product (trade name) franchising.” This is franchising in the field of trade for the sale of finished goods. In product franchising, the franchisor is usually the manufacturer who sells the finished product or semi-finished product to the franchisee dealer. The latter provides pre-sales and after-sales services to buyers of the franchisor's products and refuses to sell competitors' products. This rule is the essential content of the relationship between the partners - the franchisor and the franchisee-dealer.

This type of activity involves acquiring from a leading company the right to sell goods with its trademark. In this case, the franchisee purchases goods from the franchisor and then resells them on behalf of the franchisor. In some cases, the leading company is responsible for both payment for warranty services and reimbursement of costs for joint advertising. As a rule, product franchising is characterized by a narrow specialization of franchisees in the sale of one type of goods and services.

Manufacturing franchising is franchising for the production of goods. In this case, a company that owns the technology for manufacturing a certain product sells raw materials for production to local or regional factories (for example, a soft drink bottling plant). A small company here not only acts under the franchisor’s trademark and sells its products and services, but is also included in the full cycle economic activity a large corporation, fulfilling the same requirements of the technological process, quality, personnel training, fulfillment of the sales plan, and operational reporting. This form provides for close contact between the franchisor and franchisee, detailed regulation of activities and a high degree of responsibility of the small enterprise.

Business franchising or business format franchising. In this method, the franchisor licenses individuals or other companies to open stores, kiosks, or entire groups of stores to sell a set of products and services to customers under the franchisor's name. Thus, this is franchising for a type of activity, i.e. inclusion of a small enterprise in the full production and economic cycle of a large corporation. Perhaps the most popular type of franchising, in which a leading company sells a license to private firms or companies for the right to open their own company selling products and services under the name of the franchisor (for example, rental and personal services, business and professional services to business and the public, stores or chains eateries, hotels). A large corporation imposes the same requirements on the technological process, quality, and also provides personnel training, selection of a site for the construction of an enterprise, and other services (methods of ensuring sales, maintaining operational reporting, etc.). Business franchising requires the franchisee to pay ongoing fees and also make contributions to an advertising fund administered by the franchisor. The franchisor can lease fixed assets to the franchisee and offer him financing; he also has the right to act as a supplier for his franchisees.

Although there are many variations of classic franchising (Figure 5), three are the most commonly used. These are: regional franchising; sub-franchising; developing franchising (Figures 6, 7, 8, 9).

Figure 6 - Classic franchising

Figure 7 - Regional franchising

Figure 8 - Sub-franchising

Figure 9 - Developing franchising

This area of business, which is opened under a franchise, is currently the leader in Russia. More than half (namely, 55%) of franchises are sold in the field of product franchising. It will be interesting to note that abroad the leader in the catering franchise market is not retail. There is a possibility that over time it will be the same for us.

In our country, the opportunity to buy a franchise appeared not so long ago, so it began to grow from the most familiar area for us, namely, trade. The most popular area of trade can be called clothing trade. After all, people are greeted by their clothes. Everyone always needs clothes.

Food trade is not far behind.. Franchises of shoes, cosmetics, and jewelry are also consistently purchased. Due to the fact that we have a fairly large selection of companies under whose franchise you can start working, franchisors are not deprived of choice.

Public catering

This type of franchise takes 2nd place in the Russian catering market. Only 20% of establishments that open under a franchise are catering establishments (Unlike Western countries, where catering is in first place).

Franchisees always face difficult choices. After all, you should choose what is the best cafe to open?? What format should this be?

Nowadays, quite a lot of formats of catering establishments can be opened as a franchise. This is a family cafe, a sushi bar, a beer hall, and even a mini coffee shop.

In this case, it all depends on how much money the franchisee has. After all, depending on the format of the establishment, the lump sum fee will change. But we can note the relationship between the size of the business and the popularity of the brand and the amount of profit.

Services sector

This area occupies about 15% of the total market.

There are a lot of proposals here, they concern quite different areas. These areas include, for example, a beauty salon franchise or a legal services office franchise. This list also includes travel companies and dry cleaners. Many examples can be given in addition to those given.

Sphere of production

Only 10% of the entire franchise business is collected here.

The most common option for franchise production is production of soft drinks. This franchise is the most unpopular.

But working under such a franchise means that the franchisor will give its franchisee a number of benefits. They are quite important for the most successful production.

The franchisor provides a developed business plan, provides necessary equipment, trains personnel, organizes sales of products. We can say that the franchisor provides excellent working conditions for franchisees.

Retail

"Needle"

This is a self-service store. The store offers a fairly wide selection of goods intended for handicrafts, as well as sewing accessories. In a store, the buyer can touch and examine everything. This attracts buyers here, regardless of their qualifications.

Business investments amount to from 6,800,000 rub.

Start of a franchising program in Russia: 2008
Number of stores that are open under franchise: 8
Number of own enterprises: 26

O'STIN

This is a fairly well-known clothing store brand.

The franchisor requires the franchisee to provide space for a store from 250 to 1200 sq.m. and with a population of 50 thousand people. The store is popular both in Russia and abroad.

Crossroads

This is a chain of grocery supermarkets. These are grocery stores within walking distance. The first store was opened in 1995, in Moscow. Investments to open a store amount to up to 41,000,000 rubles.

Public catering

McDonald's

Probably the most popular and most famous fast food restaurant chain. Although it’s quite difficult to call them restaurants. Nevertheless, the brand is popular not only in Russia, but also abroad.

This is a fairly popular, but at the same time, quite expensive option for working under a franchise.

Moreover, only one The lump sum fee for such a franchise is $60,000.You will have to invest from $250,000 to $650,000 to open a restaurant.

In addition, the franchisor strictly selects candidates who can open a franchise business. But the franchise is popular, the brand is quite promoted. And this fact can be called attractive for people who decide to open a business in the food industry.

Killfish

Another well-known franchise, a good example of a discount bar. Quite popular among young people due to fairly low prices. One of the most inexpensive bars. Opening costs are approximately 3,350,000 rubles, which, you see, is much lower than the cost of opening a McDonald's restaurant.

Such discount bars are actively opening as franchises in Russia. The franchisor is quite loyal to the selection of candidates. You can apply for a franchise on the bar’s official website. The franchisor helps calculate the necessary investments to open a business and helps with organizing the opening of a bar.

A fairly profitable franchise for those who have already been involved in business and understand that they can cope with a business of such a large format.

Mini coffee shop Lucky Day

A mini coffee shop requires a fairly small investment to open, only 145,000 rubles. The franchisor requires a royalty of 2% of turnover per month and advertising fees in the same amount. Such a business pays for itself in 4-8 months.

A mini coffee shop will be beneficial for those who do not have experience running their own business. due to the fact that investments are quite low, you can even do without borrowing funds. In addition, the franchisor helps with business organization.

Services sector

Familia

Beauty salons are opening in Russia and the CIS countries. The advantages of such salons include affordable prices for services and the fact that each client is treated quite friendly, helping him save his time. These beauty salons are time-tested.

The cost of investment is up to 1,200,000 rubles. The royalty fee will be fixed – 15,000 rubles.

The payback period for such a project is up to 12 months.

Singum

This is a narrow-profile intellectual property company.

The company sells agreements for trademark registration. The advantage of the company is that the franchisor does not require a franchise. Investments amount to 68,800 rubles. Payback is 1 month.

Production

Sagama

The franchisor allows you to open a business for processing car tires.

Now the situation is such that recyclable materials are practically not recycled. There is a demand for rubber, which tires are processed into. The franchisor provides equipment for tire recycling. The cost of the equipment is approximately RUB 8,270,000.

The advantage of such a business is that there are regular buyers of crumb rubber, and in addition, the material for crumb rubber is practically free.

Tires that have served their purpose are simply thrown into the trash; accordingly, you only need to pay for the collection of products.

Conclusion

As we see, franchisees most often open retail stores (55% of all purchased franchises) and catering outlets (20% of all purchased franchises). Moreover, our public catering is very diverse, it can be either a large format like McDonald’s or a fairly small format, for example, a mini coffee shop.

Services and manufacturing are less popular. The service sector suffers the most during a crisis. Due to the fact that Russia quite often finds itself in a state of crisis. In general, a franchisee can choose any field of business. It depends on the money the franchisee has, experience in running the business and many other factors.

If the franchisee has no business experience yet, it is better to choose a budget option, the cost of which will not exceed 200,000 rubles.

Opening your own business is not as difficult as it might seem at first glance. If you don't have good ideas for doing business is not a problem; today it is possible to legally use other people’s ideas and business models to make money.

Franchising can be applied in a variety of business areas: manufacturing, trade, services, banking and insurance, etc.

Franchising classifications;
Types of franchises according to the format of interaction between the franchisor and franchisee;
Types of franchises by type of business activity;
Summary.

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What types of franchising are there?

The success of this form of business has led to the emergence and successful operation of a variety of types of franchising. Before purchasing one or another franchise, it is worth studying the features of each of them in order to be prepared for the format in which you will have to work. There are several classifications of franchise systems. Depending on the degree of freedom of doing business, there are the following types of franchises:

Standard or classic;
Free;
Turnkey business;
Business for rent;
Master Franchise;
Corporate.

According to the format of the enterprise being created and the type of activity, the classification of types of franchising is as follows:

Trade franchising;
Service;
Industrial;
Mixed.

Let's take a closer look at the types of franchising with examples to understand what advantages and disadvantages each of them has.

Standard or classic franchise

This form refers to the main types of franchising and provides for the payment of a lump sum fee (payment for the purchase of a business model) and regular royalty payments. At the same time, the franchisor strictly controls the activities of the franchisee.

For example, if we are talking about trade, then representatives of the franchisor regularly check the appearance of the outlet, the display of goods, staff training and much more. In addition, the franchisor sets the size of the trade margin and controls the turnover of the outlet. This format is not very common in Russia, since domestic businessmen prefer to have more freedom in doing business.

Free franchise

This type of franchise is more attractive for Russian entrepreneurs and, accordingly, more widespread in Russia, as well as in the CIS countries. Within this model, the entrepreneur receives more freedom when making certain decisions, and the leadership role of the franchisor is reduced to a minimum. As well as the size of the corresponding payments (royalties, lump sum, etc.).

Turnkey business

This model assumes that the franchisor completely creates a branch of his organization and transfers it to the franchisee, reserving the right to receive part of the profit from its work. This format of cooperation is extremely rare in Russia.

Business for rent

The essence of this type of franchising system is that the brand owner, as in the previous case, creates a branch of his company, but does not transfer ownership of it to the franchisee. The outlet is rented out, and the entrepreneur manages it with the possibility of receiving a certain percentage of the profit.

Master franchise

A master franchise is the right to do business under the wing of a franchisor in a certain region. The franchisee receives the right to work in the region individually, opening new branches independently, or transferring the franchise further, thereby helping the sub-franchisee start a business.

Corporate franchise

A corporate franchise is a type of franchising that implies fairly little freedom for the franchisee to make certain decisions. Ownership of the assets belongs to the franchisor, who also controls the process of doing business. In addition, such interaction often includes a prohibition on terminating the contract with the franchisor and the impossibility of creating your own business in the same location, but under a different brand.

Types of franchises by type of activity

Trade franchising;

In trade franchising, the brand owner transfers to the entrepreneur the right to use his name, his sales methods, and sell his product. Representatives of the franchisor help the businessman decorate the outlet in accordance with the corporate style, provide the staff with a unified uniform, and the store itself with appropriate equipment. This type of franchising is easier to master and organize, which is why it is much more widespread than other forms.

A striking example of trade franchising can be stores of such brands as: Felix, Positronics, Columbia and others. They help franchisees set up a retail outlet, organize a business and arrange supplies of goods. Franchisors often promise that they will start receiving operational profits within three months after the store is launched.

Service franchising

Service franchising is somewhat more complicated than trade franchising, since it is not enough to simply design an outlet in a certain style. The franchisor transfers not only the right to use the trademark, but also technologies, procedures and techniques for providing certain services. In addition, this type of franchising is often associated with the provision of franchisees with specialized software products, special literature and information.

This model is less common in practice, since the franchisor must provide detailed rules and procedures in accordance with which each of the branches will have to operate. And the entrepreneurs themselves need to be trained and monitored to ensure compliance with the established methodology. In addition, in Russia, service franchising is less developed than in the West also because the population uses various types of services much less often.

Manufacturing franchising

Here we are talking about the transfer of a certain technology for the production of a product in demand among the population. This could be baking Ossetian pies or making furniture. The franchisee will have the right to manufacture the same product as the franchisor, use a well-known brand to label it, and also sell manufactured products. At the same time, corporate style, marketing and trading strategies are also conveyed.

This type of franchising is quite rare; more often, companies acquire a license to manufacture a particular product under a well-known brand.

Mixed type

This option combines elements of each of the above types. The most common type is a mixed type, which includes trade and service franchising. This happens when the franchisor is a manufacturer selling its products through a network of franchisees who, in addition to sales, also provide customer service. An example is a network of beauty salons opened by a cosmetics manufacturer. As a result, franchisees will provide services to customers using the manufacturer’s product, while selling it.

Summary

Franchising has a number of advantages for both brand owners and entrepreneurs buying a franchise. The former discover new points of sale for their products, while making a minimum of effort to expand their distribution network. The latter get the opportunity to work under a well-known brand, spending much less time and money on advertising and promotion. At the same time, you can open a business without having to come up with something original in order to beat your competitors.

Each entrepreneur chooses which type of franchise to use for himself, including based on personal qualities, connections and capabilities. Some are ready to organize production, while others prefer quick and simple trade. What type of franchise would you choose? Write about it in the comments.

04.04.2015

Starting an independent business from scratch is always difficult, especially if you have no idea about the first steps, the course of development, or possible problems on the path to success. While novice entrepreneurs are constantly looking for their place in the consumer market, large producers of goods and services are constantly searching for new spheres of influence and markets. The natural process was the unification of these two directions moving towards each other. To unite common interests into a profit-generating enterprise, a method of entrepreneurship called franchising was founded.

In our country, this type of relationship between large companies owning brands and small businesses has received a legislative basis in the form of a commercial concession agreement. Historically, the owner of a brand who rents out his name, production technology and secrets of success is called a franchisor, and an entrepreneur who uses someone else’s name is called a franchisee. Open franchise business - means having the opportunity to use the trademark, rights and authority of the company, technology and secret commercial information of a large well-known company.

All types franchise business are similar in one thing: there are two parties involved. One is a large, reputable, successful company interested in spreading its brand, the second is a small business, ready to start its own, but afraid of the risks associated with inexperience.

In the process of cooperation, one party receives a stable profit in the form of a percentage that the franchise brings . Franchise business, in turn, has the opportunity to develop based on experience large company. In exchange for a monthly payment of a percentage of the company's income, the franchisee receives a business that does not require advertising on its part. In addition, the franchisor can act as a guarantor for a business development loan.

Before choosing the right franchise for your startup, it’s worth understanding what they are. There are three main directions in franchising:

· Product franchising. This is one of the easiest and least expensive ways to start your own business. It involves the sale of certain products of a large manufacturer under a concession agreement. Product franchising is most often found in the field of trade in household appliances, cosmetics, clothing, shoes, etc.

· Manufacturing franchising. Second most common among novice entrepreneurs. In this case, the franchisee buys the right to produce goods using equipment and technology patented and owned by the franchisor. At the same time, the owner of the brand carefully monitors the quality of the output product, because his reputation depends on it. The franchisor provides the ward with equipment (under a rental, sale or leasing agreement) and raw materials. Examples include franchisors such as Fanta, Coca-Cola, Pepsi, etc.

· Franchising in the service sector. In this case, the franchisee acquires the right to carry out some type of activity to meet the client’s needs. Examples of this type of brand rental include beauty salons, travel companies, restaurants and coffee shops. The franchise extends to a whole set of patented rights. For its part, the tenant undertakes to maintain a uniform design of the premises, style and quality of customer service.

For those who want to have their own business, but are not ready to start on their own, a franchise gives them a chance not only to make a profit, but also to gain enormous comprehensive experience.

Franchising is one of the ways of doing business, a type of market relationship between two economic entities. The first is the owner of the company that produces products (goods, services or work) and the business model used in this company. The second is the holder of the official right to use this model, as well as the brand, trademarks, corporate identity and other attributes of the main business in their own independent enterprise.

Key franchising object. This is the name given to the set of rights and responsibilities that accompany a business developed within the framework of such a system of relations. In addition, the business model itself is called a franchise.

Franchisor- This is the business owner, the main recipient of income. He creates a business model, which subsequently becomes the object of the contract. In addition to income from the business itself, the franchisor receives royalties from those who use its business model.

Franchisee is the owner of an independent enterprise who purchases from the franchisor for a certain period the right to use his business model and related rights. The franchisee receives income from using the franchise.

General understanding of franchising

Franchising can be roughly understood as the rental of business elements: brand, logo, trademarks, corporate identity, range of goods or services, and so on. But the most important thing that the franchisee “rents” is the business model. Thus, the franchisee does not open own business from scratch, but uses a ready-made scheme, officially acquiring the right to use it from the franchisor. Typically, a fixed amount is paid to purchase a franchise. It creates the main threshold for newcomers to enter the business.

The legality of borrowing a business model is the main difference between franchising and market plagiarism. The business owner is aware that the model and elements of the business he has developed are used to benefit other businesses and contribute to their growth. In return, such enterprises share their income with the main company and, in turn, contribute to its growth.

The rights and obligations of the parties are established by agreement. The document also records the financial features of their relationship. For using a ready-made business model, the franchisee pays the business owner either a fixed amount once a period or a percentage of the revenue received (royalties). The franchisor gets the opportunity to expand the business without effort on his part.

An important point: a franchisee is the owner of an independent enterprise that is neither a branch nor a representative office of the main company. All legal rights and obligations, income and expenses of each franchisee exist separately from the obligations and budget of the main company.

Video - What is franchising?

Variability of franchising conditions

This cooperation scheme does not imply any single standard of relations. In contrast to general ideas about trade partnerships, representation, and distribution relationships, franchising is very variable.

Financial conditions are not the only aspect that distinguishes different schemes of such interaction from each other. Other requirements may vary. In some franchises they are extremely loyal: it is enough to use a trademark, logo, other symbols and assortment. This allows franchisees to adapt to target audience and geographical location, use creativity and your own strategy.

In some franchises, the requirements can be very strict. Here are just some examples of parameters that the franchisor can strictly regulate and control after the conclusion of the contract:

recipes, packaging of goods;
staff uniforms and actions;
layout, dimensions of premises;
cost of different types of products;
corporate identity, interior design;
equipment and equipment of the company;
sizes, color of interior elements.

In some franchises, the set of requirements can be very strict. In this case, the franchisee has quite little freedom of action - he has to strictly follow the instructions. Moreover, the agreement may provide for regular monitoring and various penalties for deviations from instructions - up to and including revocation of the license.

To ensure uniformity of corporate identity and other business elements, the main company can send specialists in a particular field (designers, HR managers, etc.), consultants, and controllers. Moreover, in some cases, the expenses for the work of such employees are included in the budget of the main company, in some cases they are assigned to the franchisee. This aspect is also regulated by the original contract.

Franchise of the fast food restaurant chain “SubWay”

In addition, the franchise purchase agreement may imply certain exclusive conditions. For example, it may be provided that in one city, region or country only one enterprise has the right to act as a franchisee of the main company. The agreement may oblige the franchisee to limit or completely exclude their participation in the development of certain types of business, cooperation with certain companies - direct or indirect competitors of the main company.

Types of franchising

Summarizing certain parameters, we can distinguish several main types of franchising:

Commodity- the franchisee receives the right to sell goods produced under a certain brand to end consumers. Historically, this is the very first type of cooperation under this scheme. In addition to sales rights, the franchisee usually receives other rights: maintenance, warranty repairs, exchange, consultations, promotions, and so on. The terms of the contract may regulate the range of goods, their prices, terms of sale, and so on.
Industrial- the franchisee produces and sells certain goods, materials, equipment. The main difference from product franchising is that the franchisee owns proprietary technology and receives special equipment for industrial production. In addition to the production technology itself, the terms of the contract may regulate the composition of the personnel at the enterprise, safety standards, environmental and other standards that the final product must comply with.
Service- the franchisee provides certain services. At the same time, representatives of the main company control the quality and composition of the services provided. Requirements, as a rule, are related to promotions and the representative aspect (design, staff uniforms, and so on).
Business- a separate type of franchising, which is also called business franchising. It differs in that the main company gives the franchisee a license to organize this type of business. The transfer of the license is accompanied by detailed instructions on employee training and other aspects of enterprise organization.

It should be noted that franchising does not always refer to any one of the listed types. For example, a McDonald's franchise is a business format, since the franchisee receives a business license and detailed instructions for organizing the enterprise. But at the same time, this is partly an industrial franchising (preparing dishes using a certain technology), and partly a service one (services for the sale of food and drinks, delivery to an address, a separate procedure for servicing car owners, and so on).

Advantages of franchising

Both the business owner and the franchisee have their own advantages with this type of cooperation scheme. Efficiency and mutual benefit are confirmed by at least a long history of franchising in developed countries.

What does the franchisor get?

By owning a business and selling a license to own a franchise, you can provide yourself with several advantages:

Partners achieve growth without increasing the company's staff. Managers and employees are the responsibility of the franchisee and are not part of the main staff. All this simplifies administration functions for the business owner and relieves him of many financial and social risks. The most difficult problems that threaten the reputation of the company as a whole can be solved by revoking the license.
Income becomes partially passive and increases quantitatively. Firstly, the franchisor receives a royalty on sales or a fixed payment. Secondly, the agreement may often imply the obligation of the franchisee to purchase certain products, equipment, and consumables from the main company - this also increases its profitability.
The franchise advertises itself. Unlike a simple business partnership, a franchise is recognizable among consumers. People who come to another city or country, who have already appreciated the products offered where they were before, will buy them in a new place. That is why much attention is paid to corporate identity, business model and brand philosophy.
Business expansion costs have been significantly reduced. The franchisor does not finance the development of new enterprises - all expenses, including construction, repairs, finishing, hiring staff, purchasing equipment, are borne by the franchisee. The infrastructure of the main business is growing, while the costs of its owner are minimal - in this franchising is approaching the efficiency of a network business.

Of course, the franchisor can receive all these advantages only if he has carefully thought through the terms of cooperation, taken into account potential risks and leveled them out through fairly strict selection criteria.

What does the franchisee get?

Buying a franchise can be a suitable solution for both beginners and experienced businessmen. It all depends on the entry conditions and the potential level of profitability. With proper planning, the franchisee will also benefit. It is as follows:

The business model has already been fine-tuned and tested. This is the main advantage of the franchise, especially relevant for beginners. A completely autonomous business needs to be planned and thought through. At the same time, there is always a risk of encountering low efficiency and losing money. A franchise is much more likely to be profitable: if it has been operating successfully for many years, it means it is effective.
Reduced costs for initial development and advertising. This benefit is similar to that received by the franchisor. An enterprise opened as a franchise already enjoys authority and recognition among customers. Consequently, it will take much less time and money to establish it on the market.
An optimal level of autonomy is maintained. The franchisee is not directly subordinate to the business owner. He makes his own management decisions, this is his main difference from the heads of branches and representative offices. The franchisor's control is aimed primarily at achieving maximum efficiency of the newly opened enterprise - this does not in any way infringe on its legal and economic independence.
Forecasts and prospects are much more accessible than with independent planning. The larger the franchise, the more attention is paid to planning and the more widely information about business performance is disseminated. Capital investors and aspiring businessmen can choose both an industry and a specific franchise from among those competing with each other.
Training is carried out centrally based on an extensive database. The franchisor has information on successes and mistakes, conducts trainings, seminars and master classes. Employees learn much faster. Consultants and experts of the main company transfer knowledge accumulated over years and decades.
Problems are solved at the level of the entire business model. Cohesion and common principles of management imply that management accumulates information about existing problems and finds common solutions. This eliminates the need to develop the enterprise through trial and error.
The general authority of the business increases the loyalty of local partners and customers. Business reputation and philosophy have already been built by the business owner - all that remains for the franchisee is to wisely manage the existing potential of opportunities.
There are no problems with the supply of special equipment, consumables, and so on. Either the main company acts as a supplier for franchised enterprises according to the terms of the contract, or it coordinates supplies and acts as a guarantor of transactions, or makes recommendations based on existing knowledge - in any case, it is much easier to arrange supplies than when developing a completely autonomous enterprise.

The list of advantages of a franchisee looks very impressive, although it cannot be said that he is completely free from market risks and from all the difficulties associated with the formation of an enterprise that maintains legal and financial independence.

Are there any disadvantages to franchising?

There are no ideal business schemes. Despite the extensive benefits, franchising has its disadvantages. They apply primarily to franchisees, because the risks of a business owner differ little from the risks that would arise under any other system of doing business.

So, what are the negative sides when buying a franchise:

The treaty imposes restrictions on decision-making. Regardless of personal opinion and the current economic situation, the franchisee cannot perform certain actions.
Control of supplies, on the one hand, makes it possible to arrange them faster; on the other hand, it limits access to the free market. If the prescribed delivery conditions are not the most favorable, the franchisee is still forced to accept them.
The larger the franchise, the more difficult it is to enter the business. We are talking about financial fees, mandatory purchases, creating a corporate identity, and so on. In some cases, opening a franchise business is more expensive and takes longer than a completely autonomous one.
The royalties paid by the franchisee are used by the business owner at his own discretion. Consequently, if the business owner makes an ineffective decision, then part of the income received by the franchisee will be canceled or even become a loss.
An agreement may imply obligations not only when entering a business, but also when leaving it. For example, a franchisee may be deprived of the opportunity to participate in the development of competing enterprises for a certain period of time.

Despite these disadvantages, franchising is one of the most popular schemes in the modern world. It has almost a century-old history and great prospects in various countries, including Russia.

Prerequisites and development of franchising in the world

The founder of the American company Singer is considered the historical founder of this phenomenon and the first franchisor. On the basis of an agreement, he transferred to his distributors not only representation and trade, but also the right to repair branded sewing machines. Each agreement of this first franchise was valid in a certain part of the country.

The prerequisite for this phenomenon was the development of a sales network: Singer sewing machines were successful and were sold throughout the country. Consumers needed their devices to be serviced and repaired by qualified specialists from the same company. Instead of independently establishing branches throughout the country, Singer decided to transfer the right to maintain machines to financially independent companies. Thus, repair and maintenance became the first services that complemented the functions of distributors and made them franchisees.

As a mass phenomenon, modern franchising has existed since the 1920s. Initially, it extended to the production of consumer goods, then to the oil and gas sector, and from the second half of the last century to various services. The financial crisis in the United States destroyed many large corporations, and cooperation between business owners and financially independent partners - franchisees - came to the fore.

McDonald's is the world's most famous franchise

A classic, textbook case of turning a business into a franchise is the founding of a McDonald's restaurant. Initially, American entrepreneur Ray Kroc was interested in a small popular restaurant. However, instead of simply buying it out, he entered into an agreement with the owners for the right to establish similar restaurants throughout the country. In this way, he multiplied a successful model instead of competing with other individual restaurants.

McDonald's franchise

The key point of this deal was that Kroc focused his attention on the business model itself. This is believed to be the first time a franchise has been established in the business format currently in use: the franchisee not only acts on behalf of the business owner, but also uses the same business model. Currently, all McDonald's restaurants (as well as many other similar chains), despite their differences, use the same business principles.

Today, McDonalds remains one of the world's largest franchises: only 15% of restaurants are owned by the corporation itself - the rest are owned by franchisees. It is worth noting that entering a business is quite expensive, and the terms of the contract regulate all the nuances of doing business. The situation is similar with another of the world's largest franchises - the Columbia clothing corporation. Thus, a Columbia franchisee must comply with strict requirements for the trading platform and purchase the first batch of goods worth $80 thousand or more from the main company.

The formation of franchising in Russia

On Russian territory, franchises developed much later than in the USA, Western Europe and other countries. Only since the 1990s, after the transition to a market economy, the principles of implementing franchising within the framework of Russian legislation became possible. True, at first, chaos reigned predominantly in this area, as in other areas of Russian business.

The first successful franchises in Russia are considered to be “G. M.R. Planet of Hospitality" and "Sportmaster". Since 1997, the interests of participants in this market area have been consolidated - the Russian Franchising Association appeared. By 2003–2004, there were already more than ten franchises; this way of doing business began to attract forward-thinking participants in the business environment.

As for the crisis of 2008–2009, it had an ambivalent effect on Russian franchising. On the one hand, the number of companies (as well as business entities in general) has decreased. On the other hand, after the market recovery in 2010, the updated business environment in Russia began to use franchising much more actively. In 2011, the total number of franchises was double the pre-crisis level in 2007.

Finally, the 2014 crisis became critical for many Russian franchises operating on the basis of an agreement with foreign partners. Sales of branded apparel were particularly hard hit. The rise was recorded in areas that do not depend on imports: services, tourism, microfinance, and so on. Today, the largest franchises in Russia are 1C and X5 Retail Group, owner of the Pyaterochka, Perekrestok, and Karusel brands.

Instructions for purchasing a franchise

Despite the diversity of the market, the general procedure for selecting and purchasing a franchise can be reduced to a fairly simple, general algorithm.

The future franchisee analyzes the market and makes a preliminary choice. The main criteria are the prospects of a particular direction in a particular place, the level of competition, the volume of initial investments, personal interest.
Next, you need to collect as much information as possible about the franchise. In order for the information to be complete, it must be requested from representatives of the franchisor, recorded during public events, and obtained from open sources (including independent ones). Additionally, it is worth communicating with existing franchisees.
If a franchise looks promising, you need to analyze it from a legal point of view- study the documents for concluding the contract. It is important that the analysis is carried out by an experienced specialist who can detect hidden legal tricks and gaps, if any.
When already there overall plan When purchasing a franchise, a detailed description is required. It is necessary to analyze the target market, assess the financial prospects of the future enterprise, plan an advertising campaign, outline payback periods and profitability levels.
The final stage of preparation is the selection of premises, personnel and (if necessary) suppliers. Before concluding an agreement and starting to organize the enterprise itself, you need to be sure that there will be no problems with any of the aspects: neither territorial, nor personnel, nor market.

When preparation is completed, you can enter into an agreement with the franchisor and begin implementing the plan.

Franchising provides significant benefits to both the owner of the main company and each franchisee. In order for the mutual dependence of the subjects to be beneficial and not harmful, it is necessary that the franchise be fully thought out and that its effectiveness is of interest to all participants in the system, without exception. In this case, both the franchisor and the franchisee can count on a stable income.