Many people dream of starting their own business, but cannot decide to take such a step. The main reason for indecision is the lack of ideas and the fear of risk. Therefore, the franchise business is increasingly attracting the attention of beginners. We will understand the essence of franchising and learn about its pros and cons.
What is franchising
To understand the intricacies of franchising, you need to understand what it is. A foreign word hides the ability of any person to work under the name of a brand they like. And it doesn't matter whose logo it is - Russian or foreign. The main thing is that the consumer knows him, and the owner makes it possible to earn on his name. A franchise is an agreement offered by a brand owner to an entrepreneur.
Franchising is very convenient - no need to wait for ideological inspiration, think about advertising, rating and demand. Everything has already been done for you. The franchisor (owner or representative of the brand) explains in detail to the franchisee (an entrepreneur who signs an agreement to conduct business under a certain franchise) the intricacies of doing business. All risks, estimates are calculated, and drawn up step-by-step instruction. This is what attracts people who do not have experience, or those who tried to discover something of their own, but did not work out.
A franchise is an agreement offered by a brand owner to an entrepreneur.
Financial side
So, you are offered a finished case. Take and use. But the owner of the brand is ready to share not just like that, but for a fee. These conditions may be different for each franchisor.
What do you have to pay the franchisor:
1. Lump sum.
This is the initial payment that is required to conclude the contract. This is a kind of brand rental fee or membership fee. Sometimes these contributions are so large that a novice entrepreneur simply cannot afford the amount.
2. Royalty.
Monthly payment in favor of the owner and it depends on the percentage of the franchisee's income. In other words, the entrepreneur needs to pay a kind of income tax every month to the brand owner for the opportunity to generate income.
But not all franchise forms include these concepts. Everything depends on the specific case. Some companies take only a lump-sum fee, while for others it is zero and the franchisee pays only royalties. But it also happens that the owner of the brand requires payment and lump sum, and royalties. Therefore, it is worth evaluating your capabilities in advance so that you do not have to take off rose-colored glasses at some point.
There is, of course, another way to open a franchise business - without investments. The principles of a franchise without investments are that an entrepreneur claiming such a right must convince the owners trademark that his candidacy will improve performance, but this big job. Only in rare cases does the franchisor become an investor for the franchisee.
The franchisee must pay the brand owner a lump-sum fee and royalties.
Pros and cons of a franchise
In this direction, as in any other type of business, there are advantages and disadvantages that you need to know in advance. Creating a franchise is a serious work aimed at regulating the relationship between the owner of the brand and the tenant.
pros
1. Fame trademark.
The popularity of the company inspires consumer confidence. There is no need for promotion, PR. Seeing a familiar name, the client will come himself, and not for the sake of curiosity, but to purchase a product or service. Onlookers who are not related to the desired contingent will be bypassed.
2. Business support.
The franchisee will never be left behind, necessary instructions and learning. For any reason, you can contact a specialist. At the first stage, assistance is provided even in the design of the premises, if the brand requires it. In another type of business, a beginner will have to solve all the issues on his own.
3. Guarantee to the bank.
If there is a desire to open a business, but there are not enough funds, then you need to go to the bank, but it happens to a budding entrepreneur. When choosing a franchise, the owner of the brand will support you, he will guarantee the return of credit funds to the bank. Agree that it is more reliable to give funds for an already promoted business than to look for a bankrupt client later.
Minuses
1. Harsh conditions.
It is necessary to work under certain conditions that the owner dictates. Deviation from even one point is fraught with fines for the tenant of the brand or termination of the franchise.
2. The rights of the franchisee are distributed only in accordance with the signed agreement.
If the brand suffers losses or goes bankrupt, then the entrepreneur who leases the right to work under this brand will have to wind down, no matter how well things were going for him. The fact is that if the supplier of goods or equipment disappears, the supply of what the franchisee depends on stops. The risks are high, especially if you do not study the economic side of the prospective partner.
It is also worth paying attention to what conditions the brand owner dictates when terminating the contract. There are situations when a new business does not suit the entrepreneur only after the project has been launched or other circumstances have arisen to close the business. But some types of franchise strictly stipulate that they have the right to sell your department to another entrepreneur at a lower price.
The rights of the franchisee are distributed only according to the signed agreement.
3. Restrictions in the choice of suppliers.
It is possible to purchase equipment or raw materials only from certain persons, which may be unprofitable by location. Attempts to circumvent this clause will result in termination of the contract.
4. Expenses.
Do not forget that all the costs of registering a business, acquiring premises for work, purchasing goods, equipment or raw materials remain on your shoulders.
Legal regulation
When thinking about starting a franchise business, you need to study legal regulation such an agreement. Franchising in Russia is a relatively new direction in business, therefore, laws directly related to this type of activity have not yet been adopted. For Russian business, the concept of “commercial concession” is suitable, the principles of which are spelled out in Chapter 54 of the Civil Code of the Russian Federation. But it's not serious legal form, and therefore some entrepreneurs are trying to pass off as a franchise a completely different direction in business, having absolutely nothing to do with the trademark. So it is necessary to understand that the creation of a franchise must be confirmed by a written agreement, which spells out the rights of the parties.
Registration of a franchise is carried out only by the agency that issued the right to a certain brand to its owner. If such registration of the contract is not made, then the transaction will be considered illegal.
To eliminate all risks and surprises, you need to look at a sample contract of the trade mark with which cooperation is expected. It can be requested from the company or viewed on the official website. Also standard contract franchise can be downloaded from sites where directories of companies offering franchising are compiled.
Franchise Business Lines
First you need to study the areas of franchising that are offered in Russia. There are a lot of varieties, because the development of franchises does not stand still. Entrepreneurs, opening a business very often, without having tested it on their own, begin to sell franchises.
Activities:
1. Retailing.
Network retail activity. For a franchise, it is proposed to open a store that is known in many regions. For example, the well-known stores Pyaterochka, Perekrestok, Magnit, L'Etoile.
2. Sphere Catering.
This is a very popular type of business because food is always in demand. Successful examples include Subway, McDonald's, Little Potato, and various take-out coffee companies.
3. Production.
This is a very diverse type of franchise that gives you the opportunity to choose a direction: in food, growing certain crops, such as exotic flowers for flower shops. Mini-bakeries or retail outlets, where production and sale of products are simultaneously carried out, are becoming widespread. An example is Russian Pies, Pokrovsky Bakeries. This direction is very profitable, because bread is bought every day. If there is a supply corresponding to demand, then the type of production is chosen correctly.
4. Goods for children.
Toys, food and baby care products. In this case, you need to study the competition in your city or other locality so as not to be at a loss.
5. Clothing and footwear.
Goods from well-known and not so famous brands also provide great opportunities for choosing the direction of franchise business development.
6. Products for women or men.
These can be specific attributes: jewelry, watches, spare parts for cars of certain brands.
A more complete classification of types of franchising in Russia is available on specialized websites that provide such information. In the franchise directory, you can select different companies and get information about ratings and reviews from existing franchisees.
To purchase a franchise, you first need to register an IP. Franchising is only allowed commercial organizations or individual entrepreneurs. Individual cannot do business without registration.
To purchase a franchise, you first need to register an IP.
First, study the situation in your city. It is possible that the type of activity of interest is already on the market. Next, evaluate your financial capabilities, because any business requires investments. If the cost of a lump-sum contribution is excluded, then you still have to spend money on premises, the purchase of goods or raw materials, equipment. Think about whether you are afraid of responsibility to the consumer and partner. To let down a respected product brand is to lose profits. Therefore, carefully study your responsibilities before signing the contract. Don't forget about statistics. Statistics is an important parameter that can be the main one when a businessman makes a choice in favor of a particular form of franchise.
Think about what the payback period might be. To do this, you need to talk with those entrepreneurs who are already in business in order to understand which technology works 100%. Though the owner trademark and gives detailed reports and a business project, it is necessary to take into account not only the central regions of Russia, but also the outback, because the incomes of the population are different.
Let's take an example. The entrepreneur decided to expand his activities. I saw that there were few luxury furniture stores in the city and chose a narrow direction - kitchen furniture. As a partner, I chose the trademark "Kitchen Maria". Spent on rent retail space where the main samples of the factory should be placed, and purchased the samples. The owner of the brand gave a big discount on exhibition kits, but made demands that samples from the showroom not be sold for a certain period. The entrepreneur also thought that he would need funds to spend on computers with the factory's design program, but they were also provided free of charge. After the staff was hired, who were trained by the manufacturer, the salon began work. But, despite the fact that the preparations for the opening of the salon were successful, there are no customers. And all because the entrepreneur did not take into account that the cost of a headset from the brand "Maria's Kitchen" is at least 100,000 rubles. This is practically inaccessible to the majority of consumers in the region, where average salary is only 20,000 rubles. It is quite another matter when the salon is open in big city where there are more high-income people.
Terminating an already signed agreement can lead to serious problems. To avoid problems, the preparation must be very thorough. In order to check the reliability of the chosen direction, you need to find contacts where you can contact representatives. If the site only has a form where you can write a message and wait for a response, you should not do business with this company.
In order to check the reliability of the chosen direction, you need to find contacts where you can contact representatives.
Summarize
Although franchising as a kind entrepreneurial activity for Russia - the concept is new, but gaining momentum rapidly. The pros and cons of such a business are already obvious, there is experience that entrepreneurs share with each other in order to avoid serious mistakes.
The choice of activities is very large. If you study the main types of franchises, you can choose something that will bring not only income, but also pleasure. There is no serious regulation of the process by the regulatory authorities, but with the support of an experienced lawyer, you can eliminate the pitfalls in the agreement.
Having considered the main aspects of running a franchise business, we can only say one thing: if there are no ideas for developing your own direction, then you should use the experience of those who have reached great heights and received respect from the consumer.
The franchise business is becoming more and more relevant, and for good reason. It is noteworthy that this option is chosen by both beginners and experienced entrepreneurs, and this is logical. The former do not want to bother with the development of promotional materials, organizational and documentary details, while the latter, in turn, have already “made bumps” in their previous activities and are well aware that it is better to invest your money in a proven business scheme that has been successfully working for many years in a row. .
There are a lot of offers on the franchise market today, and in this moment in Russia there are several hundred of them. It is only important to study very carefully what interests you the most, since there are also little-known and sometimes simply absurd ones.
Moreover, we are talking about Moscow, where there is a lot of competition and, perhaps, branches under a certain brand have already been opened. However, sometimes franchisors allow this type of business, because it is beneficial for them to expand it.
How to choose the right franchise for Moscow?
Ideally, if you are already familiar with a particular type of business and are well aware of all its pros and cons. If there is no practical experience, then you need to study the maximum information about the franchisor. For example, to begin with, visit the office (shop) of the company under the guise of a client, to see how it all looks in reality. You may be able to communicate with franchisees who already work under this brand. Read reviews about the franchise, find out how many branches are open under it. As a rule, under the name of developed and successful companies dozens or even hundreds of franchisees work, because profitable business stable and worked out to the smallest detail.
In the end, think about what exactly you like, and in the most free form. Do you like coffee or sweets? Then you will be able to open a cafe or coffee shop with great success and pleasure. Do you like to draw or are you interested? Today, there are more than enough franchises in these niches.
In the case of Moscow, it is generally very easy to choose a franchise, because there are both elite areas with wealthy residents and peripheral places where budget goods and services will be in better demand among the local population.
In fact, any type of business can be franchised, and this is often one of the goals of any experienced entrepreneur. Expanding your business while getting a good percentage and greater recognition is the best result for many businessmen.
Money to start a business in Moscow
Naturally, the choice is also influenced by the size of the budget that the entrepreneur has. It’s good if there are several million rubles in reserve and it’s not scary to lose them, but what about those who do not have decent start-up capital? Fortunately, there are several options for starting a business in Moscow today. In particular, you can attract money from outside, for example, in the form of a subsidy or grant for business development. Credit can also be called additional opportunity, but here it is worthwhile to approach the issue very competently, because in this case the entrepreneur risks not only to burn out, but also to remain with large debts. In Moscow today there are various business incubators and centers to help start-up entrepreneurs. Of course, there is in Russian capital and the mass of private investors who may be interested in a particular direction. It all depends on the profitability of the business and how the entrepreneur will present it to a potential investor.
Advantages of a franchise business in Moscow
Moscow is exactly the city where people look at the brand more often than at the price. It is quite natural that there are already fans of this or that brand (company), so find target audience It's very easy for a franchise business. Surely in some particular area there are people who are forced to travel to the other end of the city in order to taste their favorite specialty dish or, for example, buy clothes from their favorite brand. Naturally, they will be very happy if a company store or a favorite coffee shop opens in their area. Moscow, as you know, is a very large city, so here you don’t always want to stand in traffic jams or take the metro to the right place.
Buying a franchise, the entrepreneur joins in trading network or becomes a representative of the company that provides him with full consulting, marketing and legal support. Equipment is provided, and sometimes assistance is provided in the selection of premises and staff.
By opening a franchise business, a person joins a business that successfully brings profit not only to the franchisor, but also to the partners of the company. Invaluable advice on general issues can be given here, and, if possible, you can exchange experience with other franchisees. It's definitely better than getting into an unfamiliar kind of business without any support.
When working on a franchise, an entrepreneur does not need to come up with a business idea, because everything has already been worked out and tested in practice more than once. There is a clear business strategy and it is enough just to invest start-up capital. Today there are many franchises that are great for entrepreneurs with no experience in business and personnel management.
A proven way to grow a business is to save money on market research, market analysis, and brand awareness. If the niche is in demand, then the profitability of the business will be obvious. Some franchisors provide truthful data on expected income and payback periods. They have no reason to deceive their franchisees, because any owner big company interested in the development of his brand.
It is noteworthy that the representatives of the franchisor can draw up an individual business plan for a particular branch - this will clearly determine all costs. In addition, a design project of a retail outlet can be developed and the entire cooperation scheme in the case of a franchise is usually signed in detail. This will reduce many of the risks that can be quite significant in any kind of business.
Do not forget about the advantages of franchising in the sense that the franchisor is a reliable guarantor when obtaining a loan or subsidy, because any investor or lender understands that everyone famous brand is the key to stable and high income. Sometimes franchisors can officially confirm the fact of cooperation, and this is a good help in obtaining investments.
Cons of a franchise business in Moscow
Sadly, franchising has its downsides as well. Moreover, if you do not know them, then you can easily “burn out” at the earliest stages of work.
Probably the most significant disadvantage of any franchise is that the future of the business directly depends on the franchisor. That is, if the owner of the parent company decides to stop its activities, then the entire network will automatically be closed, regardless of the number and profitability of branches. To protect yourself from this moment, you should carefully study the terms of franchises. In particular, some agreements explicitly state the terms for using the franchise and talk about compensation for damage in the event that the company's activities are terminated.
Do not forget about such moments as royalties and advertising fees - they are somewhat similar to loan obligations, especially since they must be fulfilled constantly and throughout the entire period of cooperation. Often these payments are fixed amount, which is paid regardless of profit, so paying royalties is not always easy. However, there are also franchises that do not imply any deductions - when buying a business, a one-time and fixed amount is paid.
The downside can also be called a strong dependence on the franchise owner. Obviously, there may be tight control on the part of the franchisor and the entrepreneur can sometimes feel like a hired employee. On the one hand, this may have a positive impact on profits, but at the same time, the franchisee will be forced to work within narrow limits, constantly reporting to the head office and unconditionally following corporate rules. In addition, dependence here also implies that the prosperity of the franchisee's business directly depends on the demand for the brand. Therefore, if they start to appear negative feedback or news about the parent company, then the shadow will fall on all its branches, and this, again, is fraught with the loss of customers. Again, if we are talking about Moscow, then control can be stronger, and attention - more. It is natural that all business processes here go much faster than in small towns.
The total investment when starting a franchise business is often more than when starting from scratch. When buying a franchise, you will have to pay an initial fee, buy goods and various marketing materials. When starting a business on your own, these costs may not be required, and in general you can save a lot, because in this case you have complete freedom of choice.
What is important to remember when opening a franchise business in Moscow?
Based on the foregoing, we can make a fair conclusion that it is better to choose a franchise business that better meets the individual criteria of an entrepreneur. As we said at the very beginning, today in Russia, however, as well as in Moscow, hundreds of franchises are successfully operating, so it is difficult to give recommendations on which one is better to choose. You should build on, at a minimum, the financial possibilities and conditions offered by the franchisor. It is necessary to carefully study all the nuances of such cooperation, and only then it will be possible to say that this partnership will be more likely to be successful.
Franchising is considered one of the most successful forms of entrepreneurship, in which commercial activity is based on the acquisition of rights to use a trademark and a ready-made business plan.
What does it take to open a franchise?
Opening a franchise requires some funding. To start your own business, you will need to have start-up capital that covers the current costs of concluding a contract and making priority contributions. can be done with your own funds state subsidy or a bank loan.
Interesting fact: many banks are willing to help entrepreneurs open a franchise business and allocate the necessary funds. Lending to franchise systems has the lowest degree of risk and is more secure than other loans to small businesses.
To open a franchise business, first of all, you will need to choose the legal form of the enterprise and register with the Federal Tax Service.
The next step is to make a one-time lump-sum payment. This amount covers the cost of using the trademark or brand for a predetermined period.
The lump-sum fee consists of the current costs that the franchisor's side will incur when granting and registering a franchise for the second side.
The cost of the lump sum payment will depend on:
- the degree of support and the concept of the franchise system;
- fame and popularity of the brand;
- holding marketing research and development of the current business strategy;
- lease and arrangement of premises.
Additionally, the signed agreement will specify the amount and terms of regular periodic payment for the use of intellectual property. These payments have the designation "royalty" and can be paid according to two conceptual schemes:
- as a percentage of gross profit;
- as a fixed amount.
How much does it cost to open a franchise
The cost of acquiring such a project will directly depend on the popularity of the brand and its position in the market. Of the entire list of what can be opened under a franchise, establishments are considered the most popular and profitable. fast food and fashion chains.
The amount of the lump-sum fee for medium-sized franchises starts from 150,000 rubles. For comparison, Adidas franchise costs $20,000, while the popular coffee chain StarBucks costs $150,000. Each franchisor sets its own financial target, based on the potential profit of the franchisee and economical effect for the brand owner.
Is it worth opening a franchise?
Franchising as a form commercial activities, is the most cost-effective and effective way running a small business. Both parties to the contract receive favorable conditions for their development. The franchisor, as the owner of his own brand, acquires the opportunity to open new sales markets and attract new customers to his products.
The franchisee, meanwhile, receives at its disposal a ready-made operating scheme for starting a business, as well as active support from the franchisor and assistance in resolving strategically important issues.
To avoid mistakes when opening a franchise, we recommend watching the following video:
Starting a franchise business is considered more profitable and safer than starting your own business without outside help and support. This way of doing business is most suitable for those who do not have relevant experience. It should be understood that the business will not belong to you in full - an enterprise opened under a foreign brand will bring a stable profit (subject to proper organization), but as soon as the contract is terminated or the franchise agreement expires, you will be left without customers, and without goods. But with the experience gained in doing business. All can be found in our article.
How to start a franchise business: simple steps
- Choosing a sphere
First of all, you need to focus on a certain area of \u200b\u200bactivity. Most franchises today are concentrated in the sulfur trade, public catering, less in the field of production and services. Each has its strengths and weak sides. So, trading in finished products purchased from the franchisor allows you to get a quick and stable profit. Franchise production - save money, as raw materials are cheaper than finished goods. The service sector does not require the equipment of retail outlets and the maintenance of storage facilities. Public catering is one of the least expensive and most highly profitable.
There are also disadvantages - in catering you can “burn out” if the food turns out to be tasteless, the competition is too big, the influx of customers is too small. Outlet will become unprofitable if you do not have time to sell the goods purchased from the franchisor on time (and purchases should be regular, regardless of whether you managed to sell the previous batch or not). Production is the most complex process that requires the search for narrow specialists, high costs for opening, and constant monitoring of the process. And in the service sector, royalties can reach astronomical numbers.
