What is franchising and franchise in simple words. What is a franchise and how does it work

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 “benefits” in translation. Acquisition of a franchise allows an entrepreneur to enter the market on favorable terms, investing a minimum of effort in the development of his company and the search for loyal customers. Nevertheless, the conclusion of 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 a business. First of all, you need to familiarize yourself with the basic terms used in this area.

Franchising is a type market relations, during 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 an object of a franchise agreement, which is the right to use trademarks, trade secrets, reputation and other benefits. A feature of such benefits 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 business mechanism is extremely simple: one party that has a certain reputation in the market, work experience, and also exclusive rights for the use of a complex of intangible benefits (for example, production secrets), enters into an agreement with the other party who wants to use the available opportunities and advantages. 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 a network of establishments successfully operating in Russia. fast food McDonald's, whose restaurants have been franchised since 2012.

How does a business franchise work?

To start working on a franchise, it is necessary to conclude a written contract with the selected franchisor. It will need to specify:

Rights and obligations acquired by the parties.
The procedure for paying a fee for the use of a franchise.
Detailed terms of cooperation. This paragraph may take more than one page of the agreement, since the parties will need to agree on the slightest nuances of interaction (up to the requirements for appearance premises).
Penalties for non-compliance 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.

There are the following types of franchise agreement, the principle of operation for each of which differs significantly:

Don't know your rights?

Straight. In this case, the franchisor can open only 1 enterprise and only in the place determined by the provisions of the contract.
Multifranchise. At the same time, the franchisor undertakes to open a certain number of outlets or points of service for a certain period of time.
Master Franchise. When concluding such an agreement, the franchisee assumes the obligation to sell the franchise in a certain territory, that is, he himself becomes a franchisor.

Violation established by the agreement of the regulation entails the imposition of various penalties and fines on the entrepreneur, the amount of which is also determined by the concluded agreement.

So, what is a franchise and how does it work in business? Next, let's talk about how it is paid.

How to pay to use a franchise

You will have to pay for the opportunity to do business under a promoted brand. There are 2 main ways to pay for services under a franchise agreement:

Royalty is a cash contribution paid at a certain frequency, such as once a month or quarterly. Its size may be fixed, or it may depend on the amount of profit / revenue received by the businessman. This approach is used if the franchisor is a large company with a solid turnover and a large number of consumers.
Lump payment. Such a contribution is paid by the businessman once - at the time of the conclusion of the franchise agreement. In this case, the owner of the rights to the trademark used by the businessman will not have to control the cash receipts. Using this scheme is the most profitable option for small companies.

Often, in practice, these methods of mutual settlements are combined. For example, the franchisee pays his partner a small lump-sum fee and then makes regular cash payments as royalties in the course of business.

What does a franchise mean for business development

The use of the franchising mechanism is of great importance for the development of the market as a whole. The use of this technique allows expanding the range of products offered to consumers in the regions. Due to the lack of sufficient funds, local producers cannot independently provide a decent level of service, product quality and other factors that are decisive when a consumer chooses a particular product or service. The use of technologies created by large corporations allows not only to win the trust of consumers and expand sales markets, but also to offer them a product with special characteristics.

For example, by opening a franchise store for quality watches from a manufacturer, a businessman can fill a niche previously represented by cheap items made in China. Offering a choice to customers who previously ordered such things in online stores or purchased them in other cities, it will not only satisfy their need, but also bring additional profit to the manufacturer.

Pros and cons of buying a franchise

When deciding to enter the market using a well-known brand, it is necessary to weigh all the pros and cons of using a franchise.

The advantages of this approach to managing own business are:

Significant reduction in advertising costs: acquiring a franchise involves obtaining the right to use trademark, familiar to the vast majority of consumers, and having a positive image in their minds.
No need to independently develop a business strategy and promote a product / service on the market: the franchisor will provide a ready-made marketing program, following which will attract customers and generate income.
Legal, consulting, organizational and other support from the franchisor at all stages of doing business.
Minimizing the risks that may arise not only when entering the market, but also during the further development of the business: the conditions created by the franchisor make it possible to avoid many difficulties faced by novice businessmen (for example, partners are often provided with established supplier bases, assistance in obtaining premises, selection and training of personnel, etc.).

However, there are some disadvantages of working under a franchise agreement:

The cost of some types of franchises can be very high.
Since the business is conducted under a well-known brand, it is necessary to coordinate all decisions with the franchisor and create all conditions for maintaining its reputation, which does not allow almost any amateur activity.
Sometimes the franchisor obliges the businessman to purchase Consumables, products and other items required for the conduct of business strictly from certain suppliers.

Thus, the use of a franchise is an approach to running your own business, involving the conclusion of a contract, one party to which is the owner of a certain good. Moreover, it is assumed that this benefit (know-how, trademark, commercial solution, etc.) can bring profit. The second side of the agreement here is a businessman who is ready to use this good for the purpose of conducting business. entrepreneurial activity. The possibility of working under such conditions is legalized by Art. 1027 of the Civil Code of the Russian Federation, which defines the essence of a commercial concession agreement.

Franchising today is developing very rapidly, from everywhere we hear about this line of business. This development of the brand suggests that points of sale will be opened in other cities. famous name, which use the owner's business processes. Today, this path is the best for both the franchisor (brand owner) and the franchisee (heads of outlets in the regions).

To scale a business, it is very important to pay due attention to the brand itself. After all final goal businessman - a powerful and strong network, and not 5-10-20 outlets across the country with the same name. The franchise gives certain guarantees to the brand owner that the standards and regulations will be respected by the franchisee, it is this aspect that creates unity among the offices.

Today we will talk about what a franchise is today, and how it works, what are the advantages and disadvantages of such cooperation. We will also find out what types of franchising exist today and touch on all the nuances and subtleties of this business.

What does the word franchise mean in business

Let's start by understanding what the term "franchise" means. In simple terms, a business franchise is a set of rights that a buyer begins to own after the conclusion of an agreement. This complex usually includes the following elements:

the right to use the brand;
business processes of the franchisor;
marketing, legal, information and any other support for the brand owner on business issues.

Let's see what the participants in the franchise relationship are called:

Franchisor is the owner, founder of the brand, who acts as a franchise seller.
Franchisee- a franchise buyer who acquires the right to use the brand itself and all the developments of the franchisor.

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

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

From the article it becomes known:

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

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

So, let's begin!

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

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

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

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

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

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

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

Franchisor and franchisee - who is it?

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

How does it work in practice?

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

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

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

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

1.2. Related terms related to franchising

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

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

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

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

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

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

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

franchise agreement;
license agreement;
commercial concession agreement.

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

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

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

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

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

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

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

The franchise package must include:

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

Assistance required for correct operation staff, software etc.

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

cherishing their business reputation franchisors take a very responsible approach to the formation of a franchise package.

Take note!

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

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

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

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

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

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

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

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

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

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

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

What are the franchises - 7 main types and types

3. Types and types of franchises - 7 main varieties

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

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

Type 1. Classic or standard franchise

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

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

Type 2. Free franchise

In the territory Russian Federation It is this form of commercial concession that has received the greatest use.

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

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

Type 3. Import-substituting franchises

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

Since the import into our state and the sale of certain such goods and products is now prohibited, Russian entrepreneurs seek to enter this market and offer consumers similar products, but manufactured in the Russian Federation.

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

Type 4. Silver franchise (turnkey business)

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

This is a very convenient way to start your own business for those who do not have great experience entrepreneurial activity. First of all, since there is no possibility of making a mistake at the stage of opening an enterprise, and the possibility of inconsistency with the this business brand standards.

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

Type 5. Business for rent

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

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

Type 6. Golden franchise (master franchise)

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

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

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

Type 7. Corporate franchise

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

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

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

Franchise business - the main pros and cons

4. Advantages and disadvantages of a franchise business

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

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

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

Pros (+ ) starting a business with a franchise

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

Plus 1. Minimal risk when doing business

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

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

Plus 2. Brand recognition

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

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

Plus 3. Quick profit

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

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

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

Plus 4. Minimal spending on advertising campaigns

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

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

Plus 5. Ability to receive support and receive training

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

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

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

Disadvantages (− ) of Franchise Business

There are also five main ones.

minus 1. Lack of “self-maneuver” capability

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

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

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

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

Minus 3. High price for franchises

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

Minus 4. Control by the brand owner

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

Minus 5. The impossibility of applying a creative approach

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

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

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

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

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

Popular franchises for small and medium businesses

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

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

1 place."McDonalds"

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

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

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

2nd place. Popular chain of supermarkets "Perekrestok"

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

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

3rd place. Subway Restaurant

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

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

4th place. "Coffee to go"

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

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

5th place. "Orange Elephant"

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

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

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

6. FAQ - frequently asked questions regarding franchises

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

Question 1. How to choose the right franchise?

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

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

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

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

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

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

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

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

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

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

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

The cost of concluding a franchise agreement can be different.

The price depends on several factors:

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

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

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

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

KFC restaurant franchise

Question 4. Is there a franchise without investments?

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

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

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

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

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

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

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

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

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

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

7. Conclusion + related video

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

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

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

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

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

What is franchising

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

How profitable this is can be judged by the following arguments. The most basic thing is that the franchisor receives a monetary reward without investing in expanding his business. He does not have a headache about how business is going in the branch, because the newly minted businessman is running 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 trader is the owner of the business.

Lump sum and royalties

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

Royalties, the so-called payments to the king (hence the name) are regular payments that are calculated on the basis of agreements. They can be a certain percentage of revenue or trade allowance, but can be displayed as a fixed figure, which is prescribed in the agreement. If the lump-sum fee has a certain figure, then royalty payments almost always depend on how efficiently the business is operating, and are paid regularly at the end of each reporting period for the duration of the license agreement.

What does the word franchise mean?

It is easy to define what a franchise is in simple words. From French franchise is translated as a benefit. The meaning of the word franchise and franchising is practically the same. They have much in common, except that in the first case they understand a license acquired to conduct business using someone else's trademark, and in the second case, the purchase process, the transaction itself. Working, doing business under the company's 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 a few that are common to all contracts. Franchise work implies comprehensive assistance from the owner company. The owner of the brand provides the entrepreneur with a description, instructions and instructions regarding the conduct of business, hiring personnel, working conditions, recipes and other nuances, the observance of which is simply mandatory.

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

In business

It is believed that all business start-ups have a very high risk of failing, 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 compete with large and successful market players or because the owner of his own business does not have the set of knowledge necessary to conduct a competitive business.

Franchise business, on the contrary, in most cases, and this is about 80% of the total, is successfully developing. This happens due to the fact that, together with recommendations for running their own business, the brand owner transfers the contacts of suppliers to the entrepreneur. In addition, the entrepreneur does not need to attract customers, since the brand is already recognizable.

In CASCO insurance

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

Conditional (the entire amount is paid if the damage exceeds the established amount specified in the insurance contract);

Unconditional (all money for repairs and auto parts is paid, 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. The franchise in trade has its own characteristics, which must be strictly observed. These include certain dimensions of the premises, which the franchisor requires from the entrepreneur, color design, location, and much more. Only if the entire list is observed is it possible to obtain a franchise.

Pros and cons

Perhaps there is no ideal business, so it is worth highlighting the advantages and disadvantages of a franchise:

a project “with a name” is acquired, becoming part of a large corporation;
there is no need to spend money on promoting your own business;
the possibility of obtaining the exclusive right to engage in activities in the region;
the package of documents includes patents, licenses, etc., so there is no need to spend money and time on obtaining them;
centralized advertising company;
quick income;
training and all kinds of support from the founding company.

high cost of the project;
the need to strictly comply with and follow the policy of the parent company;
the possibility of penalties for violation of agreements;
lack of creative (personal) vision of the concept of doing business.

Franchise types

Depending on the country of doing business, there is a variety of classification of the concept. According to 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;
child.

There are a lot of franchise businesses out there these days. Among the giants in the field of catering and fast food are McDonald's, Grillmaster, KFC. Zara, Waikiki, Milana, Kiabi - clothing and footwear stores that have grown into large retail chains running your own franchise business. The list goes on with many examples of companies that have become widespread through franchising.

How to buy a franchise

The first thing to do before deciding to buy a franchise is to weigh the financial possibilities. The purchase is not limited to a lump sum payment. You need to have money to register legal entity, rent of premises and other expenses. An easy and cheap option would be an internet franchise since there is no need to rent space. On the other hand, when opening a stationary outlet, a production franchise will cost significantly more than a clothing franchise.

If all this is taken into account, then it is necessary to decide on the business that you plan to do. It is important to remember that franchising implies a ready-made solution, therefore, when opening, for example, a bakery franchise, it will not be possible to add something new to baking based on a personal vision, but you will simply have to follow the brand concept. Buying a franchise in Russia, as elsewhere, implies a personal acquaintance with company representatives in order to understand how profitable the business will be and how much it will cost.

When choosing a particular company, you can ask the franchisees who are already doing business, how profitable it is, what kind of assistance the parent company provides. These moments are very important. It is possible to acquire a franchise without having initial capital or with minimum investment. A businessman will have to find a suitable premises, to ensure profit at the initial stage. A prime example is a pharmacy franchise or a movie franchise. You can take money from banks, some of which have credit programs.

What you need to know when buying

You can find offers for buying a franchise on specialized sites on the Internet, which provide all the information about the franchisor. Here you can see the cost of projects, contact information, email where you can submit your request. Since business is a risky business, you need to be aware that there can be problems and mistakes when buying a franchise, which can even lead to bankruptcy.

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

Conditions

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

cost

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

Do not be shy to communicate with representatives of franchising departments even large companies for detailed information. In addition, if there is no self-confidence, you can involve experienced professionals - lawyers, accountants, economists - in order to avoid problems. Since corporations and their directors represent average calculations, it is worth making the calculations yourself, depending on the market situation in a particular region.

Franchises in Russia

It is 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 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 and royalties.
MrDoors. Manufacture of cabinet and built-in furniture.

Video

Hello, dear readers of the blog site. The term franchise (from franchise, in translation meaning "benefit") refers to a more complex concept - franchising.

The language of science: franchising is transfer of the right to conduct business on behalf of the brand, on the one hand, and the conduct of this very activity, on the other (in fact, this is a brand rental).

But, as practice shows, the language of science is dry and obscure, so let's analyze what a franchise is in simple words.

Franchises are different (black, white, red)

This, of course, is 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 that in all cases one or another benefit is provided):

classic franchise(it will be discussed in this article) is doing business not as an independent person (enterprise), but as part of a large system (according to the laws of this system, under its brand or according to its technologies). In this case, you reduce the risk of burnout, because you will follow the beaten path having 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 franchise- we all came across this entity when, for example, we insured a car. You are offered a franchise, 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 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 the "unconditional deductible" most commonly used by insurers. For example, insurance with a "franchise 15" will cost 15 thousand rubles cheaper than. In this case, you will pay for minor damage yourself, but large checks for repairs under insurance will pay Insurance Company(but again minus 15 thousand rubles). Pretty good deal, in my opinion.

Film franchise- very similar to the 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 now it is the beginning of the formation of a franchise (the Marvel universe, for example). The initial film, in fact, becomes a popular brand that can continue to be exploited mercilessly. Everyone who wishes to do this will unfasten royalties to the copyright holder (initiator).

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

Although, the ancestor can be not only a film, but also a book, as, for example, it became with the most popular Harry Potter media franchise in the world. And vice versa, a book can be written based on the film, again as a franchise. Its author will get an advantage (due to the popularity of the film), but will pay a bribe to the copyright holder. All is well (except the readers of this book 🙂).

Some terminology

This article is written in the simplest possible 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:

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. In fact, this is the owner of the franchise.
- 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) who is writing a book about a movie will be called such a bad word.
- in fact, the very object of franchising. For example, a McDonald`s restaurant in Moscow. It was built for money Russian investor(franchisee), but at the same time operates under a number of strict conditions and standards.
Royalty, lump sum and advertising fee are the names of the investments that the franchisee makes.
1. A lump-sum fee is a fee for entering a business.
2. monthly payment in favor of the franchisor (copyright holder).
3. Advertising fee is an annual payment in favor of brand development.
4. In addition, there are classic investments.

Where did franchising come from

Franchising is a relatively young form of doing business. It appeared in America in 1850 after the invention sewing machine Singer. The novelty was so popular that the inventor simply did not have enough production capacity to provide all customers with goods. Then he sold a few large factories the right to manufacture machines 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. One of the first franchising companies began to practice McDonald's and Ford.

An interesting fact: what is remarkable about the franchise is that it is the brainchild of the crisis of the 1930s (the great depression in the states). To avoid bankruptcy, campaigns began to sell the right to operate on behalf of their brand. And so they survived.

The essence of the franchise business

Consider the principle of operation of this method of doing business on the example of opening a franchise of a trademark"Tasty coffee". Trademark, of course, is fictional (and please consider all coincidences as an accident), but it is suitable for clarity of calculations. Prices are taken from a similar, real-life coffee shop chain (what is it?).

So, a franchise is a small (or large) enterprise, in which the following features appear.

Requirements for a franchisee (a person renting a business model)

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

An empty room with an area of 8 to 15 square meters in mall or on the ground floor of a building located on a busy street.
Material base (monetary foundation) - even before acquiring a franchise, the investor must provide bank statements (what if he is naked as a falcon and only puffs 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.

Consider his actions, depending on the investments made by the participants in this scheme (junior partners, i.e. franchisees):

Lump sum(for entering the business under this scheme) - 100,000 rubles. Where does he go? 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 own personal instructor and even a manager who will manage the entire process of preparation and opening (as well as establish ). Service, however.
Investment in development- 250,000 rubles. What are they spent on? Having received another two hundred and fifty thousand, the franchisor (copyright holder) begins work on the premises, namely: overhaul, purchase of branded equipment and bringing the design to the required standard.
Advertising fee- 50,000 rubles. How are these funds spent? Having collected 50 thousand rubles from each owner (purchaser) of the franchise, its owner (not himself, of course, but specially trained people) spends on this money advertising campaign. However, not every a store separately, but the whole brand as a whole.

It is important to understand that in this example, investments are listed separately for ease of perception. In practice, the lump-sum contribution and development investment are usually packaged in one package. Most often, the franchisor insists on the immediate start of work immediately after the transfer of the right to the brand.

Fun fact: The interesting thing about franchising is that it's a very diverse business. There are franchise-based schemes for selling flowers, making pipes, and organizing hotels. In fact, this is a model that can be pulled on any business frame (see the film industry example at the beginning of the article).

How is a franchise different from a conventional business?

Let's return to our cafe from the non-existent network "Delicious Coffee". After graduation repair work and staff training, the institution begins to work.

In general, this looks like a private business, but with some reservations. Let's talk about them in more detail and, for clarity, compare it all with running a regular business (for example, an individual entrepreneur).

General provisions	Differences
And here and there success depends on the amount of effort. No matter how much the franchisor helps with the business, if there is no control over personnel and equipment, the franchise will go bankrupt.	Payment of royalties, which IP does not have. Depending on the conditions of doing business, royalties range from one to five percent. For example, with a revenue of 250,000 rubles per month, royalties will be from 2,500 to 12,500 thousand.
The general system of taxation in both cases. In the CIS, franchisees and private entrepreneurs are the same in terms of taxes.	Working and closing conditions. The franchisee is not a private entrepreneur, so he must agree big decisions with the franchisor. More on this below.
The same principle of operation for both schemes of doing business The franchise will operate in the same way as a private institution. Open, close, keep records. Nothing special happens.	Having a proven business model. In terms of a successful launch, a franchise is a venture with a minimum amount of risk.

So you understand, right? With the help of a franchise, you stand "under the side of the big uncle." 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 principle of franchising and 85% when working according to the usual scheme for the first 5 years - the statistics are harsh).

It is clear that you have to pay for such support. Love the risk - choose the usual scheme. If you prefer a tit in your hands, a franchise is a good solution (although not ideal).

Now about sad (or joyful?). The franchise can be closed both planned and unscheduled.

Planned franchise closure. Like any type of lease, a franchise opens on a certain period. If, after the 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 stops working.
unscheduled franchise closure. A franchise may be terminated early in case of bankruptcy of one of the parties or at the initiative of the franchisee. In this case, the franchisee is obliged to report the closure six months before the termination of activities. This figure is universal for all contracts.

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

Advantages and disadvantages of a franchise 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 rewards for only two parties.

For the franchisor (right holder)

Advantages	Flaws
Decreased need for capital. The franchisor invests the minimum amount of money in business development.	Insecurity of intellectual property. There are cases when the franchisee, using the acquired business model, created his own brand. The franchisor is not protected from such theft by law.
Increasing the level of sales. The standard contract implies that the franchisee will purchase raw materials from the franchisor. This ensures the stable growth of the industry.	Risk of losing reputation. If the franchisee does business in bad faith, then this will affect not only his franchise, but the entire brand as a whole.
Brand development. Franchising in and of itself good publicity for the campaign owner.	Lack of complete control. By transferring the rights to conduct business to third parties, the franchisor is deprived of the opportunity to independently control the development of the business.

For the franchisee (tenant)

Advantages	Flaws
Successful start. Starting activities under the brand famous brand, the franchisee is almost one hundred percent successful in entering the market.	Lack of free access to the market for goods. The contracts clearly state the requirements for the goods. This completely eliminates the possibility of having several partners and experimenting.
Minimum promotion costs. Since the entire brand as a whole is advertised, all the work of the franchisee in this direction comes down to the annual payment of advertising fees.	The inability to directly influence the development of the brand. All global decisions regarding the further development of the brand are made exclusively by its owners.
Guaranteed supply of raw materials. The franchisor usually produces the sold goods himself, which eliminates the risks associated with working with suppliers.	Difficult exit from business. Trying to protect themselves as much as possible, franchisors include in the contract a large number of prohibitions that complicate the exit for the franchisee. For example, a ban on opening a competing business and using developments.

Interesting fact: the largest franchise company in the world is a chain of fast food restaurants Subway. It has over 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:

Commodity.
He is also the most common. The franchisee sells the product under the brand name of the franchisor. For example, nike store in Kyiv or Adidas in Warsaw.
Industrial.
The very first to hit the market (remember Singer). The franchisee, using the technology of the franchisor, produces the goods. For example, the Apple and Samsung factories in China, the Audi factory in Russia.
Service.
It resembles a commodity one, only the franchisee sells not a product, but a service. For example, a European network of dry cleaners or a network of private music schools.
Back.
The reverse can be any of the above types of franchising. Its essence is that the franchisor already pays royalties to the franchisee (in this case, 70-80 percent of the turnover).

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

THE BELL