franchise system. What is franchising and franchise: we understand the intricacies, get acquainted with the giants. Franchise loan

You will learn what a franchise is, what types of franchises are, and what are the main pros and cons of starting a franchise business

Hello dear friends! In touch Alexander Berezhnov, entrepreneur and founder of the HiterBober.ru website

Today we will talk about such a thing as a franchise.

Recently, the direction of franchising is gaining immense popularity, and in my opinion, it is completely justified.

Starting your own business through the purchase of a ready-made franchise gives aspiring entrepreneurs ample opportunities. But this method also carries some dangers.

All this will be discussed in today's article.

1. What is a franchise - we give a definition

The classic wording is as follows.

Franchise is a set of benefits that allows legal entities and individuals to use the brand, author's developments, and the franchisor's business model.

There is another definition of a franchise, I formulated it myself. It is more applicable to building a business in general.

Franchise- this is a paid right to open a business under the auspices of a well-known trademark (brand), using its rules, technologies, way of doing business.

This term can be described in different ways. In my definition, I conveyed the term "franchise" in simple terms. Let's see how this model works in practice.

Aspiring entrepreneurs sometimes do not know or do not fully understand some of the terms that are used in the field of business. Frequently asked questions are related concepts such as franchising and franchise, and the definition of the difference between them.

The growing popularity of such a form of business organization as franchising requires a thorough study of all its features. What are the advantages of this system, are there any disadvantages, and why is it beneficial to use a franchise in the small business sector?

Definition of concepts and their difference

Franchise is translated from French as a benefit and means a certain set of documents and rights to use business elements. These elements can be:

know-how and technology;
business practices;
trademarks, brands, logos;
brands;
business models;
software, etc.

In fact, this is a “rent” of a certain brand or trademark, the acquisition of the right to use all its developments, technologies, reputation for personal benefit in the form of profit. - this is the process of buying a franchise, a certain agreement between the parties. Simply put, a franchise is an object of franchising. The parties to this agreement are the franchisor and the franchisee. The first is the one who sells the franchise, the second is the one who buys it.

The contract also stipulates the payment of the cost of the franchise. It is carried out in two forms:

lump-sum payment - a one-time payment of the cost of the franchise;
royalties - payment of % of the profits received in the process of using the franchise or the payment of a fixed payment for a certain period.

A businessman assumes certain obligations:

produce products in compliance with the requirements for its quality and applied technologies;
carry out activities in a strictly established place according to the planned scheme;
use the franchisor's trademark.

What is a franchise business? An expert in the field gives the answer in a video.

History of occurrence

The history of franchising takes its toll more than a century and a half ago, in 1851 Its founder is the owner of a large company that produces sewing machines - Isaac Singer. It was he who first began to sell to independent firms the right to sell, service and repair their products throughout the United States. Thus, Singer not only distributed his product over a large area without any effort, but also provided after-sales service for it.

The next company is General Motors. Its dealers sold cars only of this company. By making a financial contribution to the business, dealers were interested in maintaining the reputation of General Motors and providing quality service when selling its products.

After a successful start, it quickly spread to other large companies. Producers of popular drinks Coca Cola and Pepsi approached it this way: they produced the syrup at the main plant, then distributed it to the franchisee's factories, where the drink acquired the final form of the product and then entered the stores.

Since the beginning of the 20th century, large manufacturers have begun to create and sell their goods to franchisees for its subsequent sale. The seller provided small sellers with discounts and the opportunity to use the trademark. This way of selling goods exists in modern conditions.

After that (30s of the 20th century), franchising spread to the oil industry, namely: gas stations began to be leased to small local entrepreneurs.

In 1945, confectioners-businessmen Baskin and Robbins began selling some of the new cafes of their rapidly growing chain under the terms of using their trademark to outside entrepreneurs. The McDonald brothers achieved great success in the field of franchising. Their fast food restaurants, which opened in the 50s. of the last century, are still very popular and have more than 30 thousand establishments around the world.

At the moment Franchising is one of the most popular and progressive forms of doing business. and is widely distributed both in the West and in Russia.

Advantages

Running a business through franchising has both positives and negatives. This system is most suitable for aspiring entrepreneurs who are going to start their own business, but are not confident in their abilities. A franchise provides an opportunity to get your own ready-made business, manage it and gain experience in the business field. In addition, there are the following benefits of franchising.

recognition brand. By franchising, you are essentially buying an established business that customers know, recognize, and often love. No need to spend money on marketing, advertising, technological or design development.

Minimum risks. The probability of the collapse of a large company is much less than a new, unknown enterprise.

Feeling support. Franchisers are interested in maintaining and improving the image of their company, and therefore usually provide assistance to subsidiaries. Consultations, advice on doing business, training in the right management decisions - this is not the whole list of information services that a franchisee can receive.

You can choose industry of interest to you and study its performance indicators before starting your own business. Before you spend your money, you will know exactly how soon the investment will pay off and how much the products will be in demand in the market.

Low level of competition. Each franchisee receives its own territory in which to conduct and develop business. There will definitely not be competitors who could have the same franchise in this territory.

Flaws

You cannot use your ideas or innovations to run a business and must follow a clearly prescribed pattern. Such a business destroys fresh ideas and does not allow the enterprise to develop in a new direction.

Enough high price franchises. To buy it, you will need a lot of money, and it is not known when they will pay off.

Inflexible selection system suppliers. Often, franchisees are forced to purchase raw materials and materials from those suppliers appointed by the franchisor. The terms of such transactions are not always favorable.

Narrow scope of activity. By purchasing a franchise and everything that comes with it (brand, trademark, etc.), you also undertake to conduct your business in the direction indicated by the franchisor, without the right to change anything.

For failure to comply with such stringent requirements, substantial fines or even deprivation of the franchise are provided.

The risks that are the parent company may still go bankrupt. Or draw up a franchise agreement in such a way that you will not receive any benefit from this transaction. So, it is necessary to approach the conclusion of the contract especially carefully, involve experienced and competent lawyers in the case and carefully study the conditions.

Franchise agreement - what is it?

In Russian law, franchising is the name of the commercial concession. This term in its meaning fully corresponds to franchising and their definitions are identical. This one consists of several items:

The subject of the contract is, in fact, those rights and benefits that are sold to the franchisor.
Parties to the agreement (copyright holder - business owner, user - franchise buyer).
The form of the contract (necessarily written, registration with the relevant service is also required).
Remuneration (royalty) - its amount and method of deduction.
Rights and obligations of the parties (both the copyright holder and the user).
Restrictions on the rights of the parties.
Contract time.
Amendment of the contract (in which cases it is possible to change its terms).
Termination of the contract (at the end of the term or at the request of one of the parties).
Responsibility (forfeits and fines for violation of the terms of the contract).

Franchising Examples

For better clarity, we can consider examples of successful sale of franchises of large companies in certain industries.

One of the most prominent representatives of franchising on a global level is the company Ray Kroc's idea to sell company franchises in all cities of America has led to the fact that at the moment the restaurant chain covers more than 30,000 establishments, and its owner has become a billionaire. Now almost every country in the world has at least one McDonald's restaurant, and those who wish to acquire a franchise are subject to rather high requirements.

Another famous example of success is the franchising company, one of McDonald's main competitors. She uses the same scheme - selling the rights to the brand, products, trademark and providing full instructions for doing business.

Among automobile companies, the brightest representatives are the mentioned General Motors and Ford who use a franchised dealer system to distribute their vehicles to customers.

The clothing chain does not invest in advertising or marketing, but in opening new points of sale. Thanks to this, the network has 1.5 thousand stores and the brand is recognizable in many countries of the world.

Franchising, despite having certain disadvantages, is an effective form of business organization, especially at the initial level, for entrepreneurs without much work experience or innovative schemes. Such a system allows you to reduce risks, get a recognizable brand and save a lot of effort and money on business promotion.

Franchising around the world is considered a promising option for doing business. In Russian entrepreneurship, this form of work is not yet sufficiently developed. Business is in no hurry to gain positive experience even in the face of increased competition. Obviously, entrepreneurs are not familiar enough with franchise opportunities.

What is franchising

Franchising is a way of business relations in which the first party to the agreement (the franchisor) transfers the right to operate according to the established scheme to the second (franchisee) for a certain fee. In simple terms, this is an opportunity to launch your own project, but with a sign of an already promoted company.

Franchising is a modern form of mutually beneficial cooperation that allows small companies to compete on equal terms with key market players

The term "franchising" itself comes from the English franchising, which translates as the right to something. And the term "franchise" was formed from the French franchise, meaning a benefit or privilege.
Although these words mean the same thing, in Russian practice, franchising is the organization of market relations, and a franchise is a contractual relationship between specific partners.

Franchising, as a form of cooperation, is recognized throughout the world as mutually beneficial, because it allows you to use the strengths of large and small businesses.

A company that stands firmly on its feet saves on the organization of a regional network, thanks to which it gets the opportunity to provide its franchisee with high discounts on goods. A start-up company earns the first capital.

In the US, franchising in the pet services segment is gaining popularity. For example, the Dogtopia franchise - provides boarding house services - a kindergarten for dogs. The company works to ensure that animals do not feel sad and develop both physically and socially. Now Dogtopia has 43 outlets in North America.

Dogtopia's Franchise Helps Animal-Loving American Entrepreneurs Start Profitable Businesses

Franchisor's rights

Unofficial statistics show that today the franchise business adds only 1% to domestic GDP. For comparison, in the US this figure reaches 10%. This difference indicates not only the low awareness of domestic businessmen, but also the more stringent franchising conditions for Russians.

By granting a franchise, the franchisor reserves the right to own:

patent;
corporate style or brand;
exclusive rights to any idea, etc.

Sometimes the contract stipulates the conditions under which the franchisor transfers part of his rights to partners (franchisees). In most cases, these rights are structured into packages in several ways:

network concept - business idea, target audience, interaction with partners and competitors, promotions;
personnel - rules for recruitment, training and work of employees, remuneration system, motivational packages;
relations with the franchisor - rules for the supply of goods, ingredients, consumables, the form and procedure for submitting reports, control measures;
production package - supply of equipment, furniture, inventory, provision of technological maps of processes and accounting systems.

The composition of the franchise package depends on the market segment in which the franchisor operates, the demand for his goods / services and other factors. A businessman can choose the most suitable option for him.

The franchise is granted in accordance with the conditions specified in the contract

How to become a franchisor

In order to become a partner-franchisor, you must fulfill several conditions:

register a trademark;
prepare all the materials that the franchisor is ready to transfer to the franchisee: from technologies and work standards to documents and office design rules;
understand which companies or businessmen and in which regions you are looking for franchisees;
enlist the support of lawyers and prepare a franchise agreement, where all the conditions for working with the franchisee are prescribed.

To understand what a potential franchisee is like, you will need skills in the field of psychology. In addition, thanks to the current development of the Internet, personal information can also be easily examined to form a picture of the franchisee.

To create a franchise relationship, you need to show your usefulness to future franchisees. As an example, Subway fast food companies attract new partners with favorable conditions. Among them:

assistance in choosing premises and opening an institution;
free trainings;
food training;
consultations and much more.

For franchising relations, it is necessary to show potential franchisees your favorable conditions

What is a franchisee

A franchisee is a businessman or company that has leased the right to use the franchisor's trademark from the franchisor. The company can work not only in another city, but also in another state. It becomes a kind of cell of the network, functioning according to the uniform rules developed by the franchisor.

The franchisee will have to bear all the costs of operating the company, as well as pay the franchisor every month. In return, the company receives a discount on the agreed types of goods and assistance in organizing the business.

Franchisees do not risk anything in case of any crises and force majeure. A reliable lifeline in the face of a well-known brand will help in a difficult economic situation.

If something goes wrong, the franchisor will tell you how to fix the situation and make the business profitable

Types of franchising

According to the methods of interaction between partners, there are four main types of franchising.

Commodity

Franchising of goods is common in the field of trade. After the conclusion of this type of agreement, the franchisee sells the goods produced under the brand name of the partner, and also carries out its warranty service. Such an agreement clearly specifies the list of goods and services and the entire sales technology.

When the franchisor provides premises or tools, he provides financial support to the franchisee and organizes staff training. The main examples of commodity franchising are the trade in household appliances, cars and fuel.

Electronics and household appliances stores "Eldorado" - a vivid example of commodity franchising

Industrial

Industrial franchising - a company with a technology for manufacturing products under a patent, provides partners with the right to manufacture and sell goods under their own brand.

The franchisee receives:

manufacturing patent;
raw materials;
assistance in staff training;
supply of all necessary equipment;
exclusive ingredients;
product advertising.

However, the franchisor will control all activities, in particular:

manufacturing process;
the volume of products produced;
quality and sales plans;
personnel qualification.

Production franchising is widespread in the manufacture of food, soft and tonic drinks. Coca-Cola is considered the main representative of such franchising.

Industrial franchising of Coca-Cola provides the right to produce goods using secret technologies

Service

Service franchising allows you to provide the consumer with services under the brand name owned by the franchisor. The senior partner usually:

provides the partner with equipment;
provides advertising techniques;
shares marketing technologies;
supervises the operation of the affiliated company.

An example of service franchising is real estate agencies, beauty salons.

Apple service franchising gives you the opportunity to engage in services under a well-known brand

Business-format franchising

Business-format (business) franchising is different in that the franchisor transfers to the franchisee not only the rights to trade in their goods, but also permission to organize this work (license).

The contract details:

the essence of the business;
personnel training methods;
interior design of the company;
staff uniforms;
advertising policy;
relationships with suppliers;
reporting.

The franchisor monitors the implementation of the rules of work. It is most common in the service sector, catering, in the hotel business and other sectors - McDonalds, Hilton, Yves Rocher, INVITRO.

Business franchising is more common in the service and catering sectors: a striking example of this is the McDonalds corporation.

Business franchising can be called one of the most reliable methods of doing business. When using this format of franchising, the authority of the franchisor provides opportunities for expansion of the company itself and enterprises that will use its authority to develop their business.

Advantages and disadvantages of franchising

Franchise business development has both supporters and opponents. The reason for the duality of opinions are the pros and cons of its conduct.

Franchise Benefits:

Ready brand. (It is known that when buying, consumers are guided not by the quality of the product, but by their liking for their favorite brands).
Guaranteed business profitability. (By purchasing a franchise from a successful business, you can understand how to achieve this success without spending money on advertising and marketing.)
Minimum cost for starting a business.
Professional training of personnel. (Special knowledge for employees is a necessary condition for the efficiency of the enterprise).
Strong partner support. (For the franchisor, the success of his franchisee is always important).

Having bought a franchise, a novice businessman enters the market faster and gets the first profit

Disadvantages of buying a franchise:

Clear rules of cooperation.
Strict quality control. (The franchisee must prepare for constant checks).
An agreed list of suppliers.
Competition ban. (Franchisees are not allowed to open their own business).
Termination of the contract by one party. (The franchisor may terminate the contract at any time).
Liquidation of the franchisor. (Often a company's exit from the market occurs in times of crisis).

These cons will become a serious problem for entrepreneurs who consider the franchise as a trial step before starting their own business.

When you get a ready-made idea, everything in it is thought out for you, and with this approach, you can forget how to act independently

What are the risks for franchisees?

Why are Russian entrepreneurs developing franchising with caution? The authors of a scientific monograph on franchising A. D. Chudnovsky and M. A. Zhukova believe that this is due to the following factors:

the risk of unexpected termination of the contract;
violation of territorial conditions;
loss of choice of suppliers;
dependency in pricing.

Cons of buying a franchise often become a problem for entrepreneurs

How to minimize risks

If you are thinking about acquiring a franchise, it is important to take a more serious approach to choosing a franchisor. You can do this by taking the following steps:

It is better to deal directly with the franchisor, and not with intermediaries.
It is more reliable to check the data on the FIPS (Federal Institute of Industrial Property) website.
Familiarize yourself with the franchise agreement. (What does the franchisor represent as support? If control is accompanied by support, there is no need to fear it).

The list of transferable rights in the contract may change. However, there must be a right to use the name and commercial information.

A commercial concession agreement is a clearly and unambiguously drawn up document. It is not replaced by different papers and is not transmitted in the form of letters.

Franchising risks for pharmacy chains

Why do Russian pharmacies almost never introduce franchising? Analysts of ARENSI Pharma believe that this is due to an underdeveloped logistics system that could provide franchised pharmacies with goods in a timely manner, as well as the need for a separate adaptation of the franchise for each region.

Only large networks with a well-functioning supply chain can afford such a scheme of work. But in this case, most likely, franchising schemes will be offered only in those regions in which the network offering the franchise operates, since the specifics of doing business in them are already known and worked out, and the adaptation of the franchise to new regions requires additional financial and time costs.

Only large networks with a proven supply chain can afford franchising work

What other difficulties are pharmacy chains afraid of? Comments are given by a representative of a network of modern pharmacies, which has 173 points in the regions of Russia.

We abandoned the traditional franchising scheme in favor of the development of agency programs, since in the classical scheme almost all responsibility is assigned to the counterparty, and subject to a number of requirements, the franchisee pharmacy is given the right to use the company's brand. In the absence of control over business processes, we cannot guarantee our customers and partners compliance with all the standards of work of First Aid pharmacies.

Alexander Semenov, General Director of the network of pharmacies "Pervaya Pomoshch"

According to Alexander Semyonov, with the agent program it is possible to use all the advantages of a large pharmacy chain, namely:

apply innovative programs;
operate automated systems;
fully control the agent's product matrix, manage inventory;
pricing and marketing projects.

As part of the agency program, it is easy to manage all key business processes and take on the main operational risks. Then the owner of the pharmacy receives a guaranteed income. This example shows that, not wanting to take risks, pharmacy chains are in no hurry to acquire franchising experience.

In the pharmacy business, franchising is still inferior to the agency scheme of work.

How to arrange interaction correctly

To start a franchise project, you will need to obtain the following documents:

the right to a trademark;
the right to a service mark;
the right to a commercial designation;
exclusive right to a secret of production.

Then you can proceed to the creation of a franchise agreement. This agreement contains:

clauses on the rights and obligations as a franchisor and franchisee;
amounts and terms of payments;
list of transferred values (both tangible and intangible).

The agreement is being registered with the Federal Service for Intellectual Property (Rospatent). Without legal confirmation, it is considered invalid.

In addition, to obtain a franchise, the company will need:

instruction for the franchisee;
set of rules and standards of the organization.

Franchise loan

Are modern lending opportunities able to influence the development of franchising relations? Can entrepreneurs wishing to work according to these schemes get a loan from a bank for the development of their project?

A few years ago, Sberbank announced lending to projects that use franchising when starting a business. Its preliminary list of franchises approved for lending includes consumer services, such as small restaurants, hair and beauty salons, travel agencies, and early childhood development centers.

Credit for start-up projects using franchising is provided only by Sberbank so far

For reference: accreditation of a franchise by a bank is a recommendation of a business model with the help of a Business Start loan. A franchise can receive accreditation after checking by the bank's specialists of its performance and payback.

Insufficient introduction of franchising into Russian realities is due to the fact that our start-up entrepreneurs know little about this way of doing business. Therefore, in order to apply the features of working on a franchise to yourself, you need to calculate all its pros and cons.

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 provided 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 franchisee. 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 common practice - and there is generally accepted terminology that makes such contracts and relationships between franchisee 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 who want 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 investments- 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 kind of 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!

Many entrepreneurs who are looking for an opportunity to start a business from scratch with minimal investment have heard of a franchise. At first glance, cooperation in the franchising format seems simple. But it has its own nuances and is associated with certain risks. To really make money from a franchise, you need to familiarize yourself with how it works.

So what is a franchise in simple words? To understand it in detail, you need to familiarize yourself with the basic concepts used in this area.

Franchise

A franchise is a type of agreement in which one company (promoted, well-known) transfers to its partner the rights to use intellectual rights or exclusive technologies. Each franchise has its own characteristics, is provided on different conditions, which is reflected in the contract.

Franchisor

This is a successful company that owns a well-known brand or technology, has a certain business reputation. It transfers the franchise to its partner on certain conditions and for a period clearly specified in the franchise agreement. Thus, the franchisor develops his business, improves it, increases brand awareness and at the same time receives payment for the use of intellectual rights.

Franchising

What is franchising? This is a business cooperation format based on a franchise. Its essence lies in the transfer of exclusive rights to intellectual property to a partner for a specific period on the terms specified in the contract.

Franchisee

An individual or legal entity can act as a franchisee, which acquires under a franchise agreement for a certain period and under certain conditions the right to use the trademark or technologies of the right holder.

Lump sum

One-time payment to the right holder for the opportunity to use a trademark, sign, technology. Is fixed, depends only on the terms of the contract, and not on the amount of benefits received in the future.

Royalty

Payment in favor of the copyright holder, which is transferred regularly throughout the term of the agreement. The amount can be fixed or calculated as a percentage of the profit received.

How does a franchise work?

Franchising is a specific business scheme. To make money on it, you need to choose a partner and sign an agreement with him. It is concluded for a certain period, after which the parties can either extend the contract or terminate it. The contract clearly specifies the rights and obligations of the parties. Compliance with the directives of the franchisor is not recommendatory, but mandatory, therefore, before signing it, you need to carefully study each item.

Such a business format as franchising implies that the right holder provides not only a business model, technologies, but also documentation, legal assistance, information and other comprehensive support.

The franchisor helps to organize a business, purchase equipment, hire staff, gives instructions for work, allocates a separate manager, whose task is to help establish the workflow.

Franchise business is beneficial for both parties. The franchisor gets the opportunity to earn more and develop the business by increasing brand awareness and making it popular. The franchisee, in turn, can use working business schemes with minimal risks, which involve small investments and guaranteed payback in the shortest possible time.

During the evolution of franchising, several types of franchises have emerged, which have their own characteristics in terms of cooperation and business. This allows a novice businessman to choose the best option for cooperation.

classical

This type of franchise has become widespread in the world. It is a classic scheme according to which the franchisee pays a lump-sum fee and royalties, and the franchisor, in turn, exercises control over the organization and conduct of business, can make adjustments in order to bring it into line with corporate norms and standards. Suitable for a beginner who is poorly versed in the peculiarities of doing business, as the risks of errors will be eliminated by the franchisor.

free

This scheme is quite popular in Russia. Its distinguishing feature is ample opportunities for franchisees. He can conduct business independently at his own discretion, with the exception of the points specified in the contract. The franchisor practically does not interfere in the activities of the partner. Therefore, the royalty payment under the agreement is also low. This type of franchise is suitable for experienced entrepreneurs who know how to run and develop a business, know its features and are confident in their abilities.

Corporate

This type of franchise is more suitable for inexperienced businessmen. Its peculiarity is that the franchisor takes care of almost all the concerns of monitoring the activities and development of the business. For beginners, this is beneficial, as there is an opportunity to learn how to work, eliminating the possibility of errors. This scheme of doing business almost completely excludes the opportunity for the franchisee to prove himself or make changes in management, which is not the main goal for newcomers at this stage.

It might be useful to read: