What is a franchise really in simple words. The meaning of the word franchise

What a franchise is and how it works is worth knowing for any aspiring businessman who wants to develop his business under the name of a well-known company. In our article you will find information both about the essence and principles of using a franchise, and about methods of paying for the right to use it.

What does the word “franchise” mean in business (what is it in simple words)?

The concept of “franchise” used in Russian comes from the French word franchise, which means “benefit”. Purchasing a franchise allows an entrepreneur to enter the market on preferential terms, investing a minimum of effort in the development of his company and finding loyal customers. However, concluding a franchise agreement entails certain material costs on the part of the entrepreneur. That is why, when deciding whether to use this approach, it is important to first understand what a franchise means in business. First of all, you need to familiarize yourself with the basic terms used in this area.

Franchising is a type of market relationship in which one party (the franchisor) grants the other (the franchisee) the right to conduct a certain type of business using the concept of its implementation developed by it.

A franchise is the object of a franchise agreement, which represents the right to use trademarks, production secrets, reputation and other benefits. The peculiarity of such goods is that they belong to the franchisor and are widely known among certain categories of consumers.

The essence of the franchise

The essence of a franchise as a mechanism for doing business is extremely simple: one party, which has a certain reputation in the market, work experience, as well as exclusive rights to use a set of intangible benefits (for example, production secrets), enters into an agreement with the other party, which wants to use the available opportunities and benefits. At the same time, the brand owner receives additional profit from the franchisee, as well as an increase in the popularity of the product and its promotion in new markets (for example, if the franchisee opens the first point in a region in which the business was not previously represented).

A striking example of franchising is the fast food chain McDonald's, which is successfully operating in Russia, whose restaurants have been opened as franchises since 2012.

How does a franchise work in business?

To start working on a franchise, you must enter into a written contract with the selected franchisor. It will need to indicate:

1. Rights and obligations acquired by the parties.
2. The procedure for paying a fee for using a franchise.
3. Detailed terms of cooperation. This clause may take up more than one page of the agreement, since the parties will need to agree on the slightest nuances of interaction (down to the requirements for appearance premises).
4. Fines for failure to comply with established conditions.

The procedure and rules for drawing up such an agreement (in the civil law of our country it is called a “commercial concession agreement”) are established by Art. 1027 and 1028 of the Civil Code of the Russian Federation.

To run your own business, it is not necessary to go through all stages of its development. This may sound surprising, but you can rent it and make a decent profit. All this is called the newfangled word “franchise”, and what is included in the concept needs to be considered in more detail.

What is franchising

Running a business is a troublesome task, and not everyone is able to understand the nuances of it. IN Lately It has become profitable to enter into a franchise agreement (commercial concession). This is a kind of agreement between two parties, where the owner of the business, called the franchisor, for a certain fee gives the right to use his name, brand, production technology and other aspects of the business to a person called the franchisee.

How beneficial this is can be judged by the following arguments. The most important thing is that the franchisor receives a monetary reward without investing in expanding his business. He doesn’t have a headache about how business is going in the branch, since the newly-minted businessman runs the enterprise using the owner’s proven methods. This is a kind of work on behalf of the owner, but at the same time the private owner is the owner of the business.

Lump sum payment and royalties

Since the owner of the business allows the entrepreneur to work on his behalf, he expects a certain reward from this - one-time or regular. The one-time payment is called a lump sum payment and is the payment to enter the owner's existing business. This is the so-called fee for the costs associated with starting a business. It is difficult to determine the exact cost of the contribution, since it depends on several factors that are considered individually.

Royalties, as payments to the king were also called (hence the name), are regular payments that are calculated based on agreements. They can be a certain percentage of revenue or trade markup, or they can be displayed as a fixed figure, which is specified in the agreement. If the lump sum fee has a certain figure, then royalty payments almost always depend on how efficiently the business operates, and are paid regularly at the end of each reporting period throughout the term of the license agreement.

What does the word franchise mean?

Define what a franchise is in simple words easily. Franchise is translated from French as benefit. The meaning of the word franchise and franchising are practically the same. They have a lot in common with the exception that in the first case they understand a license acquired to conduct business using someone else’s trademark, and in the second case they understand the purchase process, the transaction itself. Working, running a business under a company license - that’s what a franchise is in simple words.

How does it work

Each franchise has its own conditions, among which it is worth highlighting several agreements that are common to all contracts. Working under a franchise implies comprehensive assistance from the owner company. The owner of the brand provides the entrepreneur with descriptions, directions and instructions regarding running a business, hiring personnel, working conditions, recipes and other nuances, compliance with which is simply mandatory.

Upon expiration of the franchise agreement, it can be extended by mutual agreement of the parties. It's important to note that a large number of global companies use it simple form doing business, since in this way you can make a decent profit, develop markets for your products, making your own brand not only recognizable, but also popular.

In business

It is believed that all business endeavors have a very high risk of failure, which is why there are so many startups that close in the first years of their existence. This happens because a start-up business cannot withstand competition from large and successful market players or due to the fact that the owner of his own business does not have the knowledge necessary to run a competitive business.

Franchise business, on the contrary, in most cases, which is about 80% of the total, develops successfully. This happens due to the fact that, along with recommendations for running his own business, the brand owner gives the entrepreneur contacts of suppliers. In addition, the entrepreneur does not need to attract customers, since the brand is already recognizable.

In CASCO insurance

If you are planning to insure your own car in case of theft or damage, you can get a CASCO offer with a deductible from an insurance company. You have to be careful, because in car insurance it has a completely different meaning. The concept of insurance with a deductible is part of the monetary compensation that the car owner simply will not receive in the event of an insured event. It happens:

Conditional (the full amount is paid if the damage exceeds set size stipulated in the insurance contract);

Unconditional (all money is paid for repairs and auto parts, except for the amount of the insurance deductible).

In trade

To trade goods of a certain brand, the franchisee enters into a cooperation agreement with a well-known brand. A franchise in trade has its own characteristics that must be strictly observed. These include certain dimensions of the premises that the franchisor requires from the entrepreneur, color design, location and much more. Only if you comply with the entire list is it possible to obtain a franchise.

Pros and cons

There is probably no ideal business, so it’s worth highlighting the advantages and disadvantages of a franchise:

Types of franchise

Depending on the country of doing business, there is a varied classification of the concept. Depending on the degree of freedom to run your own business, a franchise can be:

• classical;
• free;
• Full construction;
• for rent;
• master franchise;
• corporate.

By type of business there are:

• production;
• commodity;
• business;
• conversion;
• daughter

Currently, there are a large number of franchise businesses. Among the giants in the field of catering and fast food are McDonald's, Grillmaster, and KFC. Zara, Waikiki, Milana, Kiabi - stores selling clothing and shoes that have grown into large retail chains, running their business as a franchise. The list goes on with many examples of companies that have become widespread through franchising.

How to buy a franchise

The first thing you need to do before deciding to buy a franchise is to weigh your financial options. The purchase is not limited to a lump sum payment. You must have money to register legal entity, rent of premises and other expenses. A simple and cheap option would be an Internet franchise, since there is no need to rent premises. On the other hand, when opening a stationary outlet, a manufacturing franchise will cost significantly more than a clothing franchise.

If all this is taken into account, then you need to decide on the business you plan to do. It is important to remember that franchising already implies ready-made solution, therefore, when opening, for example, a bakery franchise, there will be no opportunity to add something new to baked goods based on a personal vision, but will simply have to follow the corporate concept. Buying a franchise in Russia, as elsewhere, implies personal acquaintance with company representatives to understand how profitable the business will be and how much it will cost.

When choosing a specific company, you can ask the franchisees who are already running the business, how profitable it is, and what kind of assistance the parent company provides. These points are very important. It is possible to purchase a franchise without having initial capital or with minimal investment. The businessman will have to find suitable premises, ensure profit at the initial stage. A striking example is a pharmacy franchise or a film franchise. You can borrow money from banks, some of which have loan programs.

What you need to know when purchasing

You can find offers for purchasing a franchise on specialized websites on the Internet, where all the information about the franchisor is provided. Here you can see the cost of projects, contact information, email, where you can send your request. Since business is a risky business, you need to know that problems and mistakes are possible when buying a franchise, which can even lead to bankruptcy.

All this can be avoided by carefully studying and conducting detailed analysis this information. When choosing a field of activity, you need to study the feasibility of purchasing a franchise for a specific region where you plan to do business. It is important to know that an option that is perfect for a metropolis or a large city is not always suitable for small town.

Terms

Each franchisor puts forward its own specific conditions for purchasing a franchise. Some people do not trust newcomers to enter the business, which is common; for certain corporations it is important to have areas of a certain size. This applies to the sphere of trade. All conditions are specified in the contract and their implementation is simply mandatory.

Cost

Many people have encountered the problem that the cost of an inexpensive franchise can grow significantly at the final stage. For this reason, before starting the procedure, you should carefully study all the features of running this business. Calculating the cost of a franchise rests entirely on the shoulders of the franchisee, since the founding corporation may not take into account all the nuances in its proposal. These include not only a lump sum contribution and royalties, but also the investments that an entrepreneur will need to make to start a business.

Do not hesitate to communicate with representatives of the franchising departments of even large companies to obtain detailed information. In addition, if you are not sure about own strength, you can involve experienced specialists - lawyers, accountants, economists - in order to avoid problems. Since corporations and their directors present average estimates, it is worth making the calculations yourself depending on market conditions in a particular region.

Franchises in Russia

It’s impossible to say which are the best franchises in Russia and which are not, but you can give a small rating to highlight the successful ones that can bring a good income:

• Felix. Russian manufacturer of office furniture.
• Crossroads Express. Shops within walking distance with a cafe-bakery.
• Positronics. Network of electronics stores.
• InCity. Clothing stores. Opening does not require a lump sum payment or royalties.
• MrDoors. Production of cabinet and built-in furniture.

Video

Hello, dear readers of the blog site. The term franchise (from franchise, translated as “benefit”) refers to a more complex concept - franchising.

In the language of science: franchising is transfer of the right to conduct activities on behalf of the brand, on the one hand, and conducting this very activity, on the other (in essence, this is renting a brand).

But, as practice shows, the language of science is dry and obscure, so let’s look at what a franchise is in simple words

There are different franchises (black, white, red)

This is, of course, a joke, but there is some truth in every joke. Several concepts associated with this term are used and they often have different meanings (except for the fact that in all cases one or another benefit is provided):

Classic franchise(this will be discussed in this article) - this is doing business not as an independent person (enterprise), but as part big system(according to the laws of this system, under its brand or according to its technologies). In this case, you reduce the risk of going broke, because you will follow the beaten path with a “map of all shallows” in your hands, but in return you will have to pay a bribe (royalty) to the copyright holder. I would call it "renting a business."

Insurance deductible— we all came across this entity when, for example, we insured a car. You are offered a deductible, for example, 15 thousand rubles, and if the amount of damage in the event of an insured event does not exceed 15 thousand rubles, then you will not be paid anything under the insurance. And if it exceeds, they will pay the difference (the amount of damage minus the amount of the deductible).

This was an example of an “unconditional deductible”, which is most often used by insurers. For example, insurance with a “deductible of 15” will cost 15 thousand rubles less than full insurance (according to Casco). In this case, you will pay for minor damage yourself, but large checks for repairs under insurance will be paid by the insurance company (but again minus 15 thousand rubles). Quite a good deal, in my opinion.

Film franchise- very similar to classic version, but only in relation to the media industry. A successful film appears, its characters or the world invented in it become popular and this is the beginning of the formation of a franchise (the Marvel universe, for example). The initial film essentially becomes a popular brand that can continue to be mercilessly exploited. Anyone who wishes to do this will release royalties to the copyright holder (starter).

A second film “about the same thing” comes out, then a third, a fourth. They are called sequels, prequels, remakes. But, in essence, these are “products” produced using proven and patented technology. They are less likely to fail at the box office because they have the success of the franchise's founding film behind them.

Although, the ancestor can be not only a film, but also a book, as, for example, happened with the world’s most popular media franchise about Harry Potter. And on the contrary, a book can be written based on the film, again as a franchise. Its author will receive an advantage (due to the fame of the film), but will pay a bribe to the copyright holder. All is well (except for the readers of this book 🙂).

Some terminology

This article is written as best as possible in simple language, but for reasons of saving the effort and time of the author and the reader, it uses some concepts from classical economics.

Let's take a look at them:

1. Franchisor is the owner of the brand. A person (or legal entity) who, under certain conditions, transfers to other people the right to conduct activities on behalf of his company. Essentially, this is the owner of the franchise.
2. – a person (or legal entity) who buys a ready-made business model and (or) brand name from the franchisor. For example, a writer (or publisher) writing a book about a film will be called such a bad name.
3. - in fact, the franchising object itself. For example, McDonald's restaurant in Moscow. It was built with the money of a Russian investor (franchisee), but at the same time it operates in compliance with a number of strict conditions and standards.
4. Royalty, lump sum and advertising fee are the names of the investments made by the franchisee.
   1. A lump sum fee is a fee for entering a business.
   2. Royalty is a monthly payment in favor of the franchisor (right holder).
   3. Advertising fee is an annual payment in favor of brand development.
   4. In addition, there are also classic investments.

Where did franchising come from?

Franchising is a relatively new form of doing business. It appeared in America in 1850 after the invention sewing machine Singer. The new product was so popular that the inventor simply did not have enough production capacity to provide all customers with the product. Then he sold several large factories the right to produce cars and sell them on behalf of the Singer brand.

The method was far ahead of its time, so the next major franchises did not appear until a hundred years later. Companies were among the first to practice franchising McDonald's and Ford.

Fun Fact: What's notable about the franchise is that it was a product of the 1930s recession (the Great Depression in the States). To avoid bankruptcy, campaigns began selling the right to operate on behalf of their brand. That's how we survived.

The essence of a franchise business

Let's consider the principle of operation of this method of doing business. using the example of opening a brand franchise"Tasty coffee". The trademark, of course, is fictitious (and please consider all similarities to be accidental), but it is suitable for clarity of calculations. Prices are taken from a similar, real-life chain of coffee shops (which one is it?).

So, a franchise is a small (or large) enterprise, the work of which includes the following features.

Requirements for a franchisee (person renting a business model)

Even before entering the business, the franchisee is required to prepare the foundation (base). In the case of our cafe, taken as an example, this is:

1. Empty room with an area of ​​8 to 15 square meters V mall or on the ground floor of a building located on a busy street.
2. Material base (monetary foundation) - even before purchasing a franchise, the investor is required to provide bank statements (what if he is naked as a falcon and is only puffing out his cheeks).

After the franchisor is convinced of the reliability of the future partner, the second stage of franchise development begins - making investments.

Responsibilities of the franchisor (owner of the brand, business model, technology)

The franchisor undertakes to fulfill a number of pre-agreed conditions.

Let's consider his actions, depending on the investments made by the participants of this scheme (junior partners, i.e. franchisees):

1. Lump sum payment(for entering a business under this scheme) – 100,000 rubles. Where is he going? For a hundred thousand lump sum fee, the franchisee receives the rights to open a coffee shop under the “Tasty Coffee” brand, as well as instructors for staff, his personal instructor and even a manager who will manage the entire process of preparation and opening (and will also establish ). Service, however.
2. Investments in development– 250,000 rubles. What are they spending it on? Having received another two hundred and fifty thousand, the franchisor (copyright holder) begins work on the premises, namely: major renovation, purchasing branded equipment and bringing the design to the required standard.
3. Advertising fee– 50,000 rubles. How are these funds spent? Having collected 50 thousand rubles from each owner (acquirer) of the franchise, its owner (not himself, of course, but specially trained people) conducts an advertising campaign with this money. At the same time, not each outlet is promoted separately, but the entire brand as a whole.

It is important to understand that in this example the investments are described separately for ease of understanding. In practice, a lump sum contribution and investment in development are usually issued in one package. Most often, the franchisor insists on the immediate start of work immediately after transferring the rights to the brand.

Interesting fact: the interesting thing about franchising is that it is a very diverse business. There are franchising schemes for selling flowers, making pipes and organizing hotels. Essentially, this is a model that can be stretched onto any business framework (see the example of the film industry given at the beginning of the article).

How does a franchise differ from a regular business?

Let's return to our cafe from the non-existent “Tasty Coffee” chain. After graduation repair work and staff training, the establishment begins to operate.

Overall this similar to the work of an ordinary private business, but with some reservations. Let’s talk about them in more detail and, for clarity, compare all this with running a regular business (for example, an individual entrepreneur).

So you understand, right? With the help of a franchise, you stand “side by side with the big guy.” It doesn’t blow you so much, he will support you if anything, and the stability of your business is many times higher (15% of failures when working on the franchising principle and 85% when working according to the usual scheme during the first 5 years - statistics are harsh).

It is clear that such support comes at a price. If you like risk - choose the usual scheme. Do you prefer a bird in your hands - good decision there will be a franchise (though not ideal).

Now about the sad (or joyful?) A franchise can be closed either planned or unscheduled.

1. Planned closing a franchise. Like any type of lease, a franchise opens for a certain period. If, upon expiration of the contract, the parties have no claims against each other, and the franchisee has no desire to renew the contract, the scheme simply ceases to operate.
2. Unscheduled closure of a franchise. A franchise can be closed ahead of schedule in the event of bankruptcy of one of the parties or on the initiative of the franchisee. In this case, the franchisee is required to report the closure six months before cessation of activity. This figure is universal for all contracts.

Speaking of risks, one cannot help but consider the following point.

Advantages and disadvantages of franchising as a business model

Franchising is a direct business model that works without intermediaries (which is good), so it is advisable to consider risks and benefits of only two sides.

For the franchisor (copyright holder)

For the franchisee (tenant)

Interesting fact: the largest franchise company in the world is the fast food chain Subway. It has more than forty thousand franchises in the world.

Types and examples of franchising

Despite the fact that all franchising as a whole has the same concept, there are several types of this business model:

1. Commodity.
   It is also the most common. The franchisee sells goods under the franchisor's brand. For example, a Nike store in Kyiv or Adidas in Warsaw.
2. Industrial.
   The very first one to appear on the market (remember Singer). The franchisee, using the franchisor's technology, produces the product. For example, Apple and Samsung factories in China, Audi plant in Russia.
3. Service.
   It resembles a commodity one, only the franchisee sells services, not goods. For example, a European chain of dry cleaners or a chain of private music schools.
4. Back.
   The reverse can be any of the above types of franchising. Its essence is that the franchisor already pays the franchisee a royalty (in this case, 70-80 percent of turnover).

Good luck to you! See you soon on the pages of the blog site

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After reading the article, you will learn what a franchise is in simple words. Main types and most popular destinations. What expenses await you when you purchase a franchise - direct and indirect expenses.

You will see not only the advantages, but also receive complete information about the pitfalls that no franchise seller will give you.

As a result, you will have a ready-made checklist - 4 rules for choosing a franchise.

The article will also be useful for franchise sellers - you will learn all the requirements that your counterparties will use when purchasing.

One story from life

The first time I came across the concept of a franchise was about three years ago.

One young man, I’ll call him Vitaly, before arriving in Crimea, bought a franchise of a store selling construction products.

Upon purchase he received:

• A trademark known in Russia;
• Requirements for the store premises, equipment and exhibition hall;
• Samples for product exhibition, paid separately;
• Sales scripts;
• Kit various instruments to attract customers to the store;
• A place on the corporate website with its own coordinates;
• A set of tempting offers for potential customers to encourage them to make a purchase faster;
• Purchase products only from those suppliers specified in the contract.

Vitaly was glad that he bought a “ready-made turnkey business”; all that was left was to find premises, equip them and... sit back and count the profits.

But in reality everything turned out to be completely different:

• The trademark turned out to be completely unknown in Crimea, that is, it did not help Vitaly in his development;
• Sales scripts that work in the region where the franchise owner is located, for some reason did not work in Crimea;
• The set of tools for attracting potential clients turned out to be simply a collection of all the free methods available on the Internet - it was necessary to refine and adjust it to the local target audience;
• “Tempting offers” that work in other areas turned out to be self-evident in Crimea. That is, they did not carry any uniqueness in themselves;
• It turned out that the products that Vitaly needed to purchase from certain suppliers under the contract were much cheaper on the local wholesale market and there were no transportation costs.

As a result, Vitaly had to set up a business from scratch. Establish a system for attracting clients, develop unique offers and sales scripts. Negotiate with suppliers.

It turns out that he paid money for requirements for retail space and space on the corporate website, which did not bring any real value. Potential clients Those who want to find his product on the Internet turn to local, rather than national, sites.

As it turned out, we later contacted franchise buyers in other regions - the situation was approximately the same. Almost everyone had to set up a business from scratch.

Why did this happen?

The franchise owner was just in a hurry. As they say, I chased the “long ruble” ahead of time. Yes, he worked out the business system in his region, and everything worked out great for him. It remains to work out the system in other regions. Take into account the specifics and only then start selling your business as a franchise.

By the way, this example only confirms the misconception that the franchise gives easy way grow rich. This is a myth, accept it as fact. In any case, in order to develop and get your business on its feet, you will have to work hard.

Another fact is that with the help of a franchise you can do this faster and with less effort.

Basic concepts, types, costs and most popular directions

I'll start with statistics. A small business started according to an already proven scheme, that is, a franchise, is 2-3 times more successful than one started from scratch. But this is the case when you choose the right franchise.

Basic concepts - what is a franchise - in simple words

The essence of a franchise is that the seller - he is called the “franchisor” - has a successfully set up popular business that operates and develops stably. The buyer - he is called a “franchisee” - wants to create the same business in his region, region, city. In this case, the buyer agrees with the seller to purchase the right to conduct this business on their territory under certain conditions and for a certain fee.

This business right may include anything related to the franchise seller's business:

• Secrets of production;
• Recipe and costing;
• Sales system;
• Form style;
• Trademark, etc.

Conditions and payment are specified in the contract.

By the way, in Russian legislation there is no word “franchise”; it is replaced by the phrase “commercial concession”.

This type of activity is regulated by the Law on Commercial Concession.

Types and types of franchises

Franchise types are divided into:

Business franchise

The most common type. The franchisor provides an established business with a name and trademark. I gave an example of this type in my story above.

The franchisee has the right to receive the following types of assistance from the owner:

• Selection, layout and design of the premises;
• Recruitment and training of personnel;
• Development and assistance in implementing a sales system

In other words, the franchisee receives the notorious “turnkey business.”

Fast food restaurants – great example this type.

Product franchise

In this case, the franchisee receives the exclusive right to sell products produced by the franchisor.

Manufacturing franchise

Vivid examples: Coca-Cola and Pepsico.

Franchisor manufacturer - gives the right to produce and sell goods under its trademark.

In this article we will look at the first type - business franchise.

Based on the principle of operation, franchises are divided into:

• Straight. Gives the right to open only one enterprise and only in the place specified in the contract. All. Step right, step left...
• Multifranchise. The franchisee receives the right to open a certain number of outlets at a certain location and within a specified period.
• Master franchise. It's already next stage. The franchisee becomes a franchisor and receives the right to sell franchises, but only in a certain territory.

Direct and indirect costs

When purchasing a franchise, there are direct and indirect costs that you need to consider before purchasing.

Direct– pay directly to the owner and include the following types of payments:

1. Lump sum– one-time payment for the franchise. The cooler trademark, the higher this payment.
2. Royalty– regular payments. Can be fixed or as a percentage of sales.
3. Tuition fee– as a rule, this type of payment is included in the lump sum fee, but some franchisors allocate it separately.
4. Advertising fees– can also be a separate expense item. The funds go to advertising.
5. Franchise renewal(renewal) – payment for renewal of the contract.

Indirect– expenses for organizing your business on site:

• Payment of rent for the premises, plus payment of utilities; if you own the premises, then minus the rent;
• The cost of various permitting documents - certificates, licenses, patents, etc.;
• Purchase of equipment and inventory - furniture and office equipment, security and fire alarms, fire extinguishing equipment, etc.;
• Consumables (regular monthly expenses) - household goods, personal hygiene products for employees and room cleaning, light bulbs, etc.;
• Transport costs – depreciation costs for a car, fuel, etc.;
• Salaries to employees with all contributions to the pension fund, social security and tax;
• Marketing – information and promotional materials;
• Taxes - depending on the form of accounting of your enterprise;

These are the main payments that you may have to make when purchasing a franchise, but in each individual case there will most likely be more, find out and include them in your business plan right away.

The most popular franchising areas today

• Retail– all types, including supermarket chains;
• Catering– cafes, bars, restaurants, pizzerias, food delivery, etc.;
• Health and beauty industry– gyms and fitness rooms, spas, beauty salons, etc.;
• Online stores– with or without the opening of branches and offices in the regions;
• Production of various products– bakeries, ice cream factories, production of pasta, various souvenirs, clothing items, etc.;
• Microfinance companies and pawnshops;
• Building bussiness– from sales to services.

Advantages and disadvantages of buying a franchise

The main advantage of buying a franchise is that you get a “turnkey business” and you no longer need to get involved yourself - this is the message given by almost all franchise sellers. And there is some truth in this.

Pros of buying a franchise:

• Brand awareness– in essence, you are opening a branch under the trademark of a well-known brand, which is already well-known. And you won’t have to spend extra on advertising for promotion. But advertising is still needed, and in this case the franchisor will give you necessary recommendations how to carry it out with the greatest effect.

As a rule, the parent company launches massive advertising campaigns, which one way or another will come back to haunt you.

• Speed– by investing money in an already operating business, there is a high probability of making a profit in the first weeks and months, in contrast to promoting a business from scratch.
• Risk- at making the right choice franchise, you can really minimize your risks. According to statistics, 8 out of 10 companies that open a franchise business remain on the market for 5 years. In a start-up business, only 2 out of 10 remain afloat.
• Education-, as a rule, is included in the purchase of a franchise and you do not need to spend years learning the “truths.”
• Support– it is beneficial for the franchisor that you develop as quickly as possible and remain on the market for as long as possible. Therefore, you will be provided with almost any support at all levels of the business.
• Sometimes the owner provides the necessary equipment and tools for competent local business organization.

However, despite undeniable advantages– there are some, I wouldn’t call them, cons, inconvenience when buying a franchise:

1. Cost – not every franchise will be affordable for you.
2. Limitation of maneuver:
   1. all decisions must be agreed upon with the lead partner;
   1. you will not be able to refuse promotions and other actions carried out by the franchisor that are unfavorable for your business;
   1. you will not be able to realize your ideas and ideas if they are not specified in the contract;
   1. add yours;
3. Pressure - as a rule, the contract specifies the suppliers of equipment and goods from whom you must purchase. And although this is not always beneficial for your company, you will not be able to attract suppliers that are profitable for you. Otherwise - penalties.

Not much of an inconvenience, right?

Do you really want to know what a franchise really is? I would not advise you to read this article then. Why? Yes, because after you understand what cool thing- a franchise, you will scold yourself for a long time why you didn’t use it before! And you will immediately start a franchise business. And this is good money. And new worries... Well, for example, choosing a bank where to store your newly acquired millions... :)

But seriously, I really don’t understand why so many entrepreneurs of all levels don’t use a franchise. I guess they simply don’t know all the pros and cons of this wonderful business tool. Well... I'll tell you now about everything I know about the franchise.

Let's figure it out. Franchise, franchisee, lump sum, royalty

Well, we are ready to start studying the issue. what is a franchise? So. I'll tell you everything in simple terms. Here is your company. Bakes pies. She looks so successful. And even the name of your company is more or less known in your region. Well, your slacker employees even managed to whip up something like a corporate identity. And they wrote all sorts of rules and instructions for doing business.

And there is a small company that really wants to be like your company. And then the director of this company comes to you and says: “Listen, friend. Here you are trading in this large city. And I have my business in a small hole in a small town. Let me pay you money, and for this I will produce pies just like yours. And they will be called the same. I’ll definitely stop you from doing it, because you definitely won’t open your outlets in my town for the next 100 years.” You agree. And in addition you also give him a package of business instructions. And help make a sign advertising your pies. And train its employees. But... he cannot produce any other pies.

In other words, you transfer to this company the rights to use your brand and technology, plus assistance in copying the business. And this company pays you money. Well, he promises his eternal love only for your company. :) This is a franchise, to put it simply.

Of course there are other options. There are many variants of this very franchise. But you need to understand the essence. By the way, most often it is not a small company that comes to a large one. On the contrary. Big company creates its own franchise network and invites companies there.

The funny thing is that in Russian legislation there is no (at the time of writing this article) the concept of a franchise and related terms. There is a commercial concession agreement. Which, with some stretch, can be equated to a franchise agreement.

Well, let's look at the terms a little. You will meet them in any franchise agreement. So. Literally at the top.

• Franchising- this is actually the name of the process of buying and selling a franchise
• Franchisor- this is the company that sells the franchise
• Franchise– but it’s the franchise that is being sold/buyed. This is a whole package that includes documents on the rights of use, on the business scheme, on... in short, on all aspects of the work
• Brand book– this is a document where all the features are written down, thanks to which the consumer recognizes the company’s brand. From store design to advertising slogans. In fact, it’s a very necessary thing, although for some reason franchisors don’t always have it.
• Lump sum payment– one-time initial payment for the purchase of a franchise
• Royalty– and these are regular payments for the franchise

I won’t describe all this in detail. If the topic of franchising interests you, then you will need to study all the details and varieties of it all. And there are sooo many options.

Why do you need a franchise?

OK. The basic concepts of franchising have been superficially understood. Well, in general, what exactly is this whole idea of ​​buying and selling a franchise for? What is the benefit for each party?

The one who sells the franchise (franchisor)

• It’s trivial to quickly raise additional money for your business
• Sharp expansion of the sales market.
• “Boosting” your brand awareness

In general, this is an option to expand your business as quickly as possible, so to speak, “at someone else’s expense.”

The one who acquires the franchise (franchisor)

• Gains advantages over competitors due to a recognizable brand
• Buys unique (as he thinks:)) business schemes that will allow him to get ahead of competitors
• “Connects” to a preferential channel for the supply of goods with deep discounts
• Gets new clients
• Or in general - he buys a ready-made, working, profitable (again, as he thinks) business

In general, selling and buying a franchise should be beneficial for both parties. And this is often true, with some exceptions. Namely, poor development of the franchise and deliberate deception. However, more on this a little further. In the meantime, I’ll look at two main examples of the “work” of the franchise.

How to increase revenue 100 times in a year with a franchise

In general, in reality, there are only two options for real applications of the franchise. The first is the need to quickly expand its influence on any market. Either geographical or product. Now I will explain with an example.

So. You transport company. It has a dozen branches in major cities. The company is well known there. She has proven herself positively. I have developed some tricks for fast cargo transportation. After a while, a brilliant idea comes to your mind. What if we open more branches, for example, in 100 additional cities! After all, then the revenue will also grow wow!!! Inspired, you call the financial director to the meeting. And this scoundrel pours a tub on your head cold water. I say this figuratively. More precisely, it shows the costs of opening such a network of branches. You grab your head... Everything is gone! The client is leaving! You won’t find that kind of money in the next 100 years even with loans! What to do?

Like what? Sell ​​the franchise! It is she who will be the lifesaver in such a situation. Of course, the “franchise” branches will take most of the revenue. But you will still get a good sum from the lump sum contribution and the royals... Remember, I talked about them above... The main thing is to calculate everything correctly. Thus, by attracting local small transport companies to cooperate under “your flag”, you can expand your share of influence in one leap.

By the way, what is good about the franchise in this case? There are small towns where it is simply not profitable for you to open your own branch. It still won't pay for itself. Since this is a narrow-profile business unit that deals only with the transportation of goods between cities. But here is a small office, which, in addition to transport services has many others as well. For example, moving or garbage removal services will also benefit from an additional “franchise block” in the form of transportation.

Well, second. If for some reason you don’t like the franchising partner, you can always not renew the franchise agreement and open your own branch in the “fattened” place. Not fair? But such is business life :)

It is clear that similar examples can be given in any other area. Manicure services, fast food, tool rental, ...... much more... I named the first thing that came to mind... Rather, you can count on one hand the areas of business in which you cannot sell a franchise...

Franchise trading as a business. Is it profitable?

Here. And the second option for trading a franchise is actually trading for the sake of trading. That is, franchise trading as a business. How it works?

There is a small business. For example, for making personalized cakes. A franchise sales specialist buys this business. And he specially “sharpens” it for franchising. That is, it opens retail outlets as quickly as possible. It specifically “pumps up” the brand. Develops and formalizes (that is, writes on pieces of paper) business processes. Once the required development point has been reached, the process of selling the franchise begins.

A package of documents is being prepared, partners are being sought, and active investment is underway in just such a franchise network. The most interesting thing is that often the “parent” company may in the future have, to put it mildly, not very impressive financial indicators. And live and develop mainly at the expense of successful business partners who bought a franchise from her. Don't believe me? But for example... It’s okay though.. I won’t talk about these well-known companies :) Otherwise they’ll sue.

And he’s looking for a new company to promote and sell a new batch of franchises... that’s what he lives on. And as for whether a franchise is profitable or not... Just for fun, look at how many franchises are sold... And you will answer this question for yourself!