Franchising: what is it in simple words. Types and forms of franchising List what are the models of franchising

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Franchising, depending on the directions, is of four types:

1) product franchising;
2) industrial franchising;
3) service franchising;
4) business format franchising.

Franchising a product is the sale of goods produced by the franchisor and in some way marked with its trademark. Franchisees, as a rule, provide after-sales service for them.

The rightholder (franchisor) in this type of franchising is the manufacturer. The main transferable right is the right to use the franchisor's trademark. Option III assumes continuous communication between the manufacturer and the wholesale and retail trade, i.e. wholesale enterprise the right to assign the rights of the copyright holder is granted on certain conditions.

Product franchising is not widespread. In most cases, this kind of relationship is beneficial to the franchisor, since they provide him with the promotion of the trademark, expansion of the sales system and continuous communication with consumers through the sales system. At the same time, the franchisee is part of the sales system controlled by the franchisor.

Since in the overwhelming majority of cases for trade enterprises assortment policy is important, trade in selected goods is not always effective.

In cases where a trading company specializes in a particular group of goods, franchising the goods has the right to exist, since the seller organizes the sale of goods of a particular company and has the opportunity to bring his image in line with the manufacturer's image and be recognizable in the market for similar goods. An example effective work in this direction can serve as the company "General Motors", which is still the leader in the automotive industry.

An example from Russian practice can also be cited. Unfortunately, it is negative. By 1993, the largest car manufacturer, AvtoVAZ, had completely lost control of the market due to the lack of a unified marketing and pricing policy and arbitrary behavior of intermediaries and dealers. The range of prices among dealers was about 2 thousand dollars, in some cases dealers were selling cars cheaper than the factory price, which, naturally, led to great difficulties with the sale of products.

Product franchising can be applied in the marketing of petroleum products, especially when separating gas stations from larger sales structures. Although, due to the change in consumer preferences for the system of services provided at gas stations, the use of pure franchising of goods in this industry is limited. The most effective form of relationship here will be business-format franchising, which will be discussed below. Refinery franchising is most common in Australia.

Product franchising can also be used in the sale of cosmetics and branded clothing. An example of commodity franchising in Russia is Le Monti. However, in Russia, in the context of the widespread use of various credit and bill schemes for payment for products, franchising for goods is unlikely to receive widespread practical application.

Unfortunately, the lack of literature on franchising, different interpretations of the very system of relations cause a lack of understanding of the meaning and attractiveness of franchising and, as a consequence, the limited use of it in business practice.

Industrial franchising is the most efficient organization of production of a certain type of product. The company, which possesses the secret of production of raw materials and a patented technology for manufacturing a finished product, provides the end manufacturer with raw materials and transfers the rights to use this technology.

In practice, most often the owner of the rights is an enterprise that is not a producer of raw materials or finished products, and the relationship scheme is formed according to two other options.

The most prominent representative using the industrial franchising system is the Coca-Cola company. The centralized production of soft drinks is unprofitable due to the remoteness from consumers and high unjustified costs. Therefore, the commission provides end producers with special concentrates and grants the right to use the technology. In 1995 the company entered the Russian market by concluding franchise agreements. She does not independently build factories for the production of products; the subject of sale is a recipe for production and a well-established brand name.

Industrial franchising is based on common goals for the parties:

-division of labor and specialization of production;
- increasing the volume of production and expanding the production program;
- ensuring the efficiency of production;
- increasing the flexibility of production and distribution in accordance with market requirements;
- mastering the production of new products depending on changes in the market.

Manufacturing franchising has much in common with, but is not limited to, a licensing agreement. Franchising is not just a contract, it is a system of long-term relationships, detailed by the main contract and a special Franchise Manual, which is also the property of the franchisor. The terms of the license agreement are only a part of the relationship provided for by the franchising system.

Service franchising is a cross between the above two types. Its scope is services. The essence lies in the fact that the franchisee is granted the right to engage in a certain type of activity under the franchisor's trademark. The franchisor has a number of patented rights that are transferred to the franchisee on the basis of an agreement

The familiar McDonald's franchise system, along with the trademark and the technology of making sandwiches, has its own standards for the interior and exterior design of premises, corporate identity in all elements of the organization of cooking and customer service.

Actively works on russian market Kodak company. The largest representative of the franchise network - the Marriott company - is familiar to us from the Marriott Grand Hotel.

Service franchising has become widespread and is a promising technology for doing business. The main focus of service franchising is a high level of customer service. Thanks to the joint policy pursued by the franchisor and the franchisee, the consumer quickly becomes aware of the quantity and quality of services he can be guaranteed in a certain period of time at the enterprises of a certain brand. Awareness saves consumers time to find and satisfy their customers, and the expected quality of service has, among other things, a positive emotional impact, which increases the likelihood of repeated calls to the franchisee. The consumer identifies the right holder and the user of the trademark, which gives additional impetus to the development of the franchising system.

Franchising is applicable in almost all areas of the service sector. Foreign service companies are increasingly entering the Russian market offering to purchase a franchise. A franchise is the entire package of rights, technology, equipment, services, etc., offered by the franchisor for sale.

In the Russian market, service franchising is actively developing in tourism business, in the field of real estate, employment and educational activities.

Business format franchising is the most complex. Along with all the above rights, the franchisor transfers to the franchisee the technology he has developed for organizing and running a business. The franchisee is fully identified with the franchisor and becomes part of the overall corporate system. The franchisor in such a franchising can be an enterprise that extracts raw materials, a manufacturer, a wholesaler or retailer, an enterprise in the service sector, or it can only be the owner of the rights that are transferred to the franchisee under certain conditions. But at the same time, all enterprises operating in the system must work according to uniform methodology, in the same style and to comply with intrasystem interests. The business format franchising system makes it possible not only to expand the business on an intra-industry scale and related industries, but also to include various business areas in the system. A high reputation of a company in one area of \u200b\u200bactivity when using a business format franchising system in practice gives tremendous opportunities for expanding the activities of both the company itself (in this case, it will naturally be the franchisor) and enterprises that will use this reputation for organization and development your business.

Let us illustrate the above with a conditional example. A gas station is being built on the busy highway. To the modern consumer while waiting for the end of the service, you often need to call, wash your hands, have lunch, buy something, and maybe rest. Based on this? it is necessary to form several independent enterprises. To avoid the occurrence of potential clients inconsistency of activities corporate identity and methodology of their activities should be identical.

The word “franchising” comes from the French “fran-chise”, which means “benefit, privilege, exemption from tax, contribution”. Subsequently, this word was fixed in the English-speaking states. In the Civil Code of the Russian Federation (Art. 1027), this term was called “commercial concession” and “commercial concession agreement” and the following definition is given to it: “Under a commercial concession agreement, one party (rightholder) undertakes to provide the other party (user) for a fee for a period or without specifying the term, the right to use business activities user a set of exclusive rights belonging to the rightholder, including the right to the trade name and (or) commercial designation of the rightholder, to protected commercial information, as well as to other objects of exclusive rights stipulated by the contract - a trademark, service mark, etc. ” ...

In other words, in essence, franchising is a system of relationships, which consists in the paid transfer by one party (a firm, which, as a rule, has a pronounced image and a high reputation in the market of goods and services) to the other party (a firm or individual private entrepreneur) of its means of individualization. goods produced, works performed or services rendered (trademark or service mark, corporate identity), business technology and other commercial information, the use of which by the other party will contribute to the growth and reliable consolidation of goods and services in the market.

At the same time, the transferring party undertakes to assist in the establishment of the business, provide technical and consulting assistance.

Franchising is characterized by the following main features and characteristics:

- franchising presupposes the presence of two parties to the agreement (agreement) - the franchisor and the franchisee;
- the franchisor is the owner of exclusive rights: trademark, corporate identity, patent, idea, copyright and similar rights. Using Russian terminology, the franchisor is the copyright holder;
- the franchisor, being the copyright holder, transfers its rights to the franchisee on certain conditions. The franchisee operates under the franchisor's trademark, using its reputation in the market for goods (services), and is identified with the franchisor by its corporate style;
- the franchisor acts in the singular; there can be several franchisees working under a contract with the copyright holder, that is, it is a kind of network that works according to a single method. The goal of franchising is to run your own business, the goal of the networks is to sell more goods (services) and attract as many participants as possible;
- for a successful business, the franchisor provides the franchisee various forms support and enjoys the right to regulate the activities of the franchisee in order to preserve the reputation in the market without violating its legal and economic independence
- The franchisee makes certain payments for the use of the franchisor's rights and the support provided.

Franchising dates back to the early 1800s, the so-called linked house system used by British brewers. In 1860, the Singer factory, which specialized in the production of sewing machines, operated according to a scheme very close to franchising.

The Coca-Cola formula developed in 1886 and its sale in 1900 led to a powerful impetus in the development of franchising; the system began to spread rapidly under the "Coca-Cola" brand known to all until now. The greatest success in the development of this system was achieved in the 50s. the last century to the Mac Donald brothers. Currently, the McDonald's franchise system numbers about 20 thousand enterprises in different countries of the world.

In Russia, examples of franchising are McDonald's, Baskin Robbins, and Subway.

Stabilization and further revitalization of the Russian economy are directly related to solving the problems of small business development. The role of this sector of the economy has been seriously rethought in recent decades. It is now viewed as necessary condition self-development and stability of their economic system. For example, there are about 20 million small firms in the United States and more than 6.5 million in Japan. According to the Ministry economic development and trade of the Russian Federation, to enable the self-regulation mechanism, ensure sustainability and development, our country needs approximately 2.5-3.5 million small private firms. And for such mechanisms to work with confidence, this number should reach 9-12 million firms.

Russian small business is in a very difficult situation, since in our country its infrastructure is at the very beginning of its formation. One of the ways to accelerate its creation can be the widespread introduction of franchising. Franchising as a method of doing business makes it possible not only to build a system of relationships between small entrepreneurs who go into the same franchise scheme, but also to streamline their relations with external counterparties, both small and large. With its help, certain bridges are built between small and large businesses.

“Franchising”, according to one of the interpretations of this term, means: to be free, to feel a sense of freedom from the fact that in this system an entrepreneur owns a business and controls all the main decisions related to his economy. Franchising allows you to solve the problem of employment of those who, for various reasons, do not have the opportunity to open their own business or organize a business, but can and want to continue or start working fruitfully. It also makes it possible to use the labor of young students and people for whom full employment is impossible - these are housewives or young mothers, retirees, etc. To a certain extent, at a new stage in the development of market relations in Russia, franchising is intended to replace the shuttle business that has begun to wither away ...

One of the most serious problems in the Russian economy is related to the freezing of significant amounts of money by the population, which does not trust banks and stock speculation, as well as various financial schemes after the failure of the well-known pyramids. The population keeps their savings mainly in foreign currency.

The widespread use of franchise systems can significantly increase the economic activity of the population and use these funds to invest in small and smallest enterprises.

Opinion polls in industrialized countries show that entrepreneurs who join a franchise network are much more successful than ordinary entrepreneurs. Thus, franchise systems bring together individuals with clearly expressed positive attitudes. Joint interests form a common vision of both problems and goals and tasks solved in the network. In this sense, franchising is close to network marketing, which gathers under its banner the most adventurous, positive-minded part of the economically active, but free population.

The rapid development of franchise networks has become the most noticeable global trend of the late twentieth century. It is clear that this trend will continue into the new millennium. Russia is today in a state where it is difficult to talk about any general trends in organizational management... However, it can be confidently asserted that by stimulating franchising and its elements as a business management system, the state would thereby lay down certain preconditions for the transition to new, progressive forms of management.

While creating russian system Franchising should be borne in mind that the franchise network consists mainly of small businesses. This means that human factors play a very large role in it.

A Russian entrepreneur is very different from a Western or an Eastern one. He has his own views, intentions, business traditions. In addition, it should be taken into account that Russia is a multinational country, and with the beginning of perestroika, cultural and local factors began to exert a much greater influence on entrepreneurs than in the previous period. Therefore, as in many other areas, direct borrowing foreign experience is unlikely to lead to success. The community itself russian entrepreneurs taking into account international experience should ultimately work out the final solutions. In this regard, the role of the recently created Russian Franchising Association is enormous.

Many Russian enterprises have technologies that ensure the creation of a high-quality product that consumers need, and if before they did not have to look for ways and channels for selling their goods to the consumer - most worked on centralized orders, now this has become an urgent problem. However, many entrepreneurs and business leaders cite the lack of working capital, implying that the implementation of an extensive marketing strategy requires significant financial investments, which the company simply does not have. But this is not entirely true - it is franchising that can help to quickly expand its sales markets, without investing significant funds.

Indeed, the organization of branches, own sales or production points requires large financial investments, while franchising allows you to save capital by raising capital for the franchisee. The franchisee more accurately knows the conjuncture and features of the local market, which is important positive factor... At the same time, the main contribution of the franchisor becomes the trade mark, know-how, technologies, and the costs for direct organization business, including the maintenance of the management apparatus, maintenance of the premises, etc., lie with the franchisee. At the same time, the franchisor receives a certain percentage of the profits received from the sale of the goods: he also receives payment for using his name. At the same time, a small amount of investment is required, in contrast to the organization of its own retail and production outlets.

In the United States, the rapid development of franchising was facilitated by the 1946 Trademark Act. The entrepreneurs received additional profit already due to the fact that the granting of the right to other enterprises to use their trademarks under the versatile control and protection of the law allowed the owners to expand the boundaries of their business without large additional costs.

Franchising has proven to be highly effective and viable in the mid-1970s economic downturn. The position of franchising companies has been all the more solid since the beginning of the 1980s, when during the presidency of R. Reagan, the United States experienced economic growth.

The American literature cited the following statistics: in those years, in the United States, one franchise enterprise was opened every 6.5 minutes.

With a lot of domestic experience, American franchising moved overseas to sprout in other markets. Many companies have sold their franchises in other countries, and some of them are rapidly expanding their international network. Currently, more than 350 US firms and their franchisees own more than 32,000 sales establishments in other countries.

The rapid development of franchising is observed in Canada, Western Europe, Japan, the states of the Pacific region, Australia, and the countries of the Caribbean region. Franchisors from other countries are also looking closely at the Russian market. Apparently, international franchising will develop at an even faster pace in the near future. Franchisers are looking for potential franchisees in foreign countries, and many individuals and firms are actively looking for franchisors from other countries in order to acquire their license and rights and, with their financial support, make their own profitable business on their production and service technologies.

For example, the well-known manufacturer of photocopiers, the Xerox company, organized in Russia branched network centers for copying any handwritten, drawn and printed documents. To this end, the company, as a franchisor, has created centers in Moscow and other large cities through which it finances the acquisition or lease of premises, supplies copiers and consumables, trains Russian specialists and monitors their activities. This is an example of a service franchise that not only generates significant profits, but is also a powerful advertising tool for Xerox products.

The same Xerox company, as well as its competitors, have created wide distribution and service networks for copiers in Russia. All sales companies use brand names manufacturers "Xerox", "Canon" and others. Franchisers provide salespeople with the necessary instructions, spare parts, transfer know-how on maintenance and repair of equipment, finance advertising campaigns.

Effectively franchising has been and is currently being applied in the bottled soft drinks industry by Coca-Cola, Pepsi, and Seven-Up. Through the franchise, these and similar companies were able to produce concentrated syrup centrally and distribute it to bottling plants located not only in the United States but also abroad, owned and operated by franchisees, who eventually became managers of local retail sales... Franchisees have and are entitled to buy branded bottles and use brand names.

This area of \u200b\u200bbusiness, which is opened under a franchise, on this moment leads in Russia. More than half (namely, 55%) of franchises are sold in the field of commodity franchising. It will be interesting to note that overseas catering franchises are in the lead, and not retail. There is a chance that we will eventually have the same.

In our country, the opportunity to buy a franchise appeared not so long ago, so it began to grow from the most familiar sphere for us, namely, from trade. The most popular direction in the trade is clothing trade. After all, they are greeted by their clothes. Clothes are always needed by everyone.

Trade does not lag behind food ... Franchises of footwear, cosmetics, and jewelry are also regularly bought. Due to the fact that we have a fairly large selection of companies under which you can start working under a franchise, franchisors are not deprived of a choice.

Public catering

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

The franchisee is always faced with a difficult choice. After all, you should choose which cafe is the best to open? What format should it be?

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

In this case, it all depends on how much money the franchisee has. Indeed, depending on the format of the institution, the lump-sum payment will change. But you can note the relationship between business size and brand popularity and the amount of profit.

Services sector

This area occupies about 15% of the total market.

There are a lot of proposals here, they relate to quite different areas. These areas include, for example, a beauty salon franchise or a legal services bureau franchise. This list also includes travel companies, and dry cleaning. There are many examples besides these.

Scope of production

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

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

But working under such a franchise means that the franchisor will give his franchisee that many benefits. They are important enough for the most successful production.

The franchisor provides a developed business plan, provides necessary equipment, is engaged in personnel training, organizes the sale of products. We can say that the franchisor provides excellent working conditions for the franchisee.

Retail

"Needle"

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

Business investments are from 6 800 000 rubles

Start of a franchise program in Russia: 2008
The number of stores that are opened by the franchise: 8
Number of own enterprises: 26

O'STIN

This is a fairly well-known brand of a clothing store.

The franchisor requires the franchisee to build 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 grocery supermarket chain. These are grocery stores within walking distance. The first store was opened in 1995, in Moscow. Investments for opening a store amount to up to 41,000,000 rubles.

Public catering

McDonald's

Probably the most popular and most famous fast food chain. Although it is 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.Opening a restaurant will have to invest from $ 250,000 to $ 650,000.

In addition, the franchisor strictly selects candidates who can open a business under the franchise. But the franchise is popular, the brand is well promoted. And this fact can be called attractive for people who have decided to open a food business.

Killfish

Another famous franchise, good example 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 opened on a franchise in Russia. The franchisor is quite loyal to the selection of candidates. An application for a franchise can be left on the bar's official website. The franchisor helps to calculate the necessary investments for starting a business, helps with organizing the opening of a bar.

A fairly profitable franchise for those who have already done business and understand that they can handle 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 royalties of 2% of turnover per month and advertising fees of the same amount. Such a business pays off in 4-8 months.

Mini coffee shop will be beneficial for those who have no experience in their own business due to the fact that the investments are quite low, you can do without even attracting borrowed money... In addition, the franchisor helps with the organization of the business.

Services sector

Familia

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

The investment cost is up to 1,200,000 rubles... The royalty fee will be fixed at 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 trademark registration agreements. The advantages of the company are that the franchisor does not require a franchise. Investments are 68,800 rubles. The payback is 1 month.

Production

Sagama

The franchisor allows you to open a tire recycling business.

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

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

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

Conclusion

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

Service industry and manufacturing are less popular... The service sector suffers the most during the crisis. Due to the fact that Russia is often in a state of crisis. In general, the franchisee can choose any area of \u200b\u200bbusiness. It depends on the money the franchisee has, the experience of running the business and many other factors.

If the franchisee has not yet had any business experience, it is better to choose a budget option, the cost of which will not exceed 200,000 rubles.

04.04.2015

An independent business start from scratch is always difficult, especially if there is no idea about the first steps, the course of development, possible problems on the way to success. While aspiring entrepreneurs are constantly looking for their place in the consumer market, large manufacturers of goods and services are constantly looking for new spheres of influence and sales markets. The natural process was the unification of these two directions, moving towards each other. To combine common interests into a profitable enterprise, a method of entrepreneurship such as franchising was founded.

In our country, this type of relationship between large companies that own brands and small businesses received a legal basis in the form of a commercial concession agreement. Historically, the owner of the brand, who leases his name, production technologies and secrets of success, is called a franchisor, and an entrepreneur who uses a false name is called a franchisee. Open franchise business -means to be able to use the trademark, rights and authority of a firm, technology and classified business information of a large well-known company.

All kinds franchise business are similar in one thing: two parties participate in it. One is a large, reputable, successful company interested in spreading its brand, the second is a small business, ready to start its own, but fearful 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 ability to develop based on experience large company... In exchange for a monthly payment of interest on income, the franchisee company receives a business that does not need 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, you need to figure out what they are. There are three main directions in franchising:

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

· Manufacturing franchising. Second most common among aspiring 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 brand owner carefully monitors the quality of the output, because his reputation depends on it. The franchisor provides the ward with equipment (under a lease, sale or lease agreement) and raw materials. An example is such franchisors 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 needs of the client. Examples of this type of brand rental include beauty salons, travel companies, restaurants and coffee shops. In this case, the franchise covers a whole set of patented rights. For his 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, the franchise gives a chance not only to make a profit, but also to gain a colossal all-round experience.

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

The key object of franchising. This is the name of the set of rights and obligations that accompany a business developed within such a system of relations. In addition, the business model itself is called a franchise.

Franchiser is the owner of the business, the main recipient of income. He creates a business model, which further acts as 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 independent enterprisewho buys from the franchisor for a certain period the right to use its business model and related rights. The franchisee earns income from using the franchise.

General understanding of franchising

Franchising can be conventionally understood as the lease of business elements: brand, logo, trademarks, corporate identity, assortment of goods or services, and so on. But the most important thing that the franchisee "leases" is the business model. Thus, the franchisee does not open his own business from scratch, but uses a ready-made scheme, officially acquiring the right to use it from the franchisor. As a rule, a fixed amount is paid for the acquisition of a franchise. It creates a major 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 business model and elements 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 enshrined in the contract. The document also fixes the financial characteristics of their relationship. For the use of a ready-made business model, the franchisee deducts the business owner either a fixed amount once a period, or a percentage of the proceeds (royalties) received. The franchisor gets the opportunity to expand the business without efforts on his part.

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

Video - What is Franchising?

Variability of franchising conditions

This cooperation scheme does not imply any uniform standard of relations. In contrast to the general concepts of trade partnerships, representation, distribution relationships, franchising is very variable.

Financial conditions are not the only aspect that differentiates the various patterns of such interaction. Other requirements may also differ. In some franchises, they are as loyal as possible: it is enough to use a trademark, logo, other symbols and assortment. This allows the franchisee to adapt to target audience and geographic location, use creativity and your own strategy.

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

recipe, packaging of goods;
staff uniforms and actions;
layout, dimensions of the premises;
cost different types 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 very little freedom of action - he has to strictly follow the instructions. Moreover, the contract may provide for regular monitoring and various penalties for deviating from the instructions - up to the revocation of the license.

To ensure the consistency of the corporate identity and other elements of the business, the main company can send specialists in one area or another (designers, HR managers, and so on), consultants, controllers. At the same time, in some cases, the costs of the work of such employees are included in the budget of the main company, in some they are assigned to the franchisee. This aspect is also governed by the original contract.

Restaurant chain franchise fast service "SubWay"

In addition, the franchise purchase agreement may imply certain exceptional conditions. For example, it may be stipulated that only one business in one city, region or country is entitled to act as the franchisee of the parent 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 firms - direct or indirect competitors of the main company.

Types of franchising

Summing up certain parameters, there are several main types of franchising:

Commodity - the franchisee gets the right to sell end consumers goods released under a specific brand name. Historically, this is the very first type of cooperation under this scheme. In addition to the rights to sell, the franchisee usually receives other rights: service, warranty repair, exchange, consultation, conducting promotions, and so on. The terms of the contract can 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 commodity franchising is that the franchisee owns proprietary technology and receives at its disposal 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 the conduct of promotions and with a 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 transfers a license to the franchisee to organize this type of business. The transfer of the license is accompanied by detailed instructions on employee training and other aspects of the organization of the enterprise.

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 license to do business and detailed instructions for organizing the business. But at the same time, this is partly industrial franchising (cooking using a certain technology), and partly service (services for the sale of food and drinks, delivery to the address, a separate procedure for servicing car owners, and so on).

Franchising benefits

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

What does the franchisor get

Owning a business and selling a license to own a franchise can provide yourself with several benefits:

Partners achieve growth without increasing the company's staff. Managers and employees are run by the franchisee and are not part of the main staff. All this simplifies the administration functions for the business owner, relieves him of many financial and social risks. The most difficult problems that threaten the company's reputation as a whole can be solved by revoking the license.
The income becomes partially passive and increases in quantity. First, the franchisor receives a royalty on sales or a fixed payment. Secondly, the contract can often imply the obligation of the franchisee to purchase certain products, equipment, 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 have come to another city or country, who have already appreciated the offered products where they were before, will buy them in a new place. That is why a lot of attention is paid to the corporate identity, business model and brand philosophy.
Business expansion costs are significantly reduced. The franchisor does not finance the development of new enterprises - all costs, including construction, renovation, finishing, hiring personnel, purchasing equipment, are covered by the franchisee. The infrastructure of the main business is growing, while the costs of its owner are minimal - in this, franchising approaches the efficiency of a network business.

Of course, the franchisor can get all these advantages only on condition that he has competently thought out the terms of cooperation, took into account potential risks and neutralized them due to rather strict selection criteria.

What does the franchisee get

Buying a franchise can be a suitable decision for both the beginner and the experienced businessman. 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 debugged and tested. This is the main plus of the franchise, especially relevant for beginners. A completely autonomous business needs to be planned and thought out. 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 successfully operating for many years, it means that it is effective.
Reduced initial development and advertising costs. This benefit is similar to what the franchisor gets. The franchised company already enjoys authority and recognition among buyers. Consequently, it will take much less time and money to get it approved in the market.
The optimal level of autonomy is maintained. The franchisee is not directly subordinate to the business owner. Their management decisions he accepts himself, this is his main difference from the heads of branches and representative offices. The control of the franchisor is primarily aimed at achieving maximum efficiency again open enterprise - this does not prejudice its legal and economic independence in any way.
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 information about business performance is disseminated. Capital investors and business start-ups can choose both the industry and a specific franchise from among competing with each other.
Training is conducted centrally on the basis of an extensive database. The franchisor has information on successes and mistakes, conducts trainings, seminars and master classes. Employees learn much faster. The consultants and experts of the parent company transfer knowledge accumulated over the years and decades.
Problems are solved at the level of the entire business model. Cohesion and common management principles imply that management accumulates information about existing problems and finds common solutions. This eliminates the need to develop an enterprise "by trial and error."
The overall credibility of the business increases the loyalty of local partners and buyers. A business reputation and philosophy have already been built by the business owner - all that remains for the franchisee is to competently dispose of the existing potential of opportunities.
There are no problems with the supply of special equipment, supplies etc. Either the main company acts as a supplier for franchising enterprises in accordance with 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 fully autonomous enterprise.

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

Are there any disadvantages to franchising

There are no perfect business schemes. Despite the vast benefits, franchising has its drawbacks. They relate primarily to franchisees, because the risks of a business owner differ little from the risks that would arise under any other business management system.

So, what are the disadvantages of buying a franchise:

The agreement 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, allows you to quickly establish them; on the other hand, it restricts access to the free market. If the prescribed terms of delivery 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, starting a franchise business is more expensive and longer than a fully autonomous one.
The deductions paid by the franchisee are used by the business owner at their own discretion. Therefore, if the business owner makes an ineffective decision, then part of the income received by the franchisee will be canceled or even lost.
The contract may involve obligations not only when entering the 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.

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

Prerequisites and development of franchising in the world

The historical founder of this phenomenon and the first franchisor is considered the founder american company "Singer". 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 contract of this first franchise was valid for a specific part of the country.

The prerequisite for this phenomenon was a consequence of the development of the sales network: Singer sewing machines were successful and sold throughout the country. Consumers needed qualified specialists from the same company to maintain and repair the devices. Instead of setting up branches all over the country on his own, Singer decided to transfer the right to maintain the machines to financially independent firms. Thus, repair and maintenance were the first services that complemented the functions of distributors and made them a franchisee.

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 the cooperation of business owners with 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 just buying it, he entered into an agreement with the owners for the right to establish similar restaurants throughout the country. Thus, he replicated a successful model instead of competing with other standalone restaurants.

McDonald's franchise

The key point of this deal was that Kroc focused his attention on the business model itself. It is believed that this is the first time that a business format franchise has been established in use today: 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 should be noted that entering a business is quite expensive, and the terms of the contract govern all the nuances of doing business. The situation is similar with another largest global franchise, the clothing corporation Columbia. Thus, the Columbia franchisee must comply with strict requirements for trading platform and purchase from the main company the first batch of goods for 80 thousand dollars or more.

Formation of franchising in Russia

On russian territory franchises developed with a long delay in comparison with the USA, Western Europe and other countries. Only since the 1990s, after switching to market economy, the very principles of the implementation of franchising within the framework of Russian legislation became possible. True, the first time in this area, as in other areas russian business, chaos predominantly reigned.

The first successful franchises in Russia are “G. MR Planet of hospitality "and" Sportmaster ". Since 1997, the interests of participants in this area of \u200b\u200bthe market 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 ambiguous impression on Russian franchising. On the one hand, the number of companies (as well as business entities in general) has declined. On the other hand, after the market recovery in 2010, the renewed business environment in Russia began to use franchising much more actively. In 2011, the total number of franchises was double the pre-crisis 2007 figures.

Finally, the 2014 crisis became critical for many Russian franchises operating on the basis of an agreement with foreign partners. The sale of branded clothing has been 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 - the owner of the Pyaterochka, Perekrestok and Karusel brands.

Franchise Buying Instructions

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

The future franchisee analyzes the market and makes a preliminary selection. The main criteria are the prospects of one direction or another in a particular place, the level of competition, the amount of initial investments, and personal interest.
Next, you need to collect as much information as possible about the franchise. In order for the information to be complete, you need to request it from the franchisor's representatives, record it during public events, and obtain it from open sources (including independent ones). Additionally, it is worth talking to existing franchisees.
If the franchise looks promising, you need to analyze it from a legal point of view - study the documents for the conclusion of the contract. It is important that the analysis is done by an experienced analyst who can detect implicit legal gimmicks and gaps, if any.
When there is already overall plan for buying a franchise, you need a detailed one. It is necessary to analyze the target market, assess the financial prospects of the future enterprise, plan an advertising campaign, outline the payback periods and levels of profitability.
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 with the territorial, nor with the personnel, nor with the market.

When the preparation is completed, you can conclude an agreement with the franchisor and start implementing the plan.

Franchising provides significant benefits to both the owner of the parent 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 be 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.

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