What is a franchise in simple words - how to find, choose and buy a franchise, the pros and cons of franchising. What is a franchise in business: definition, types, pros and cons What is a franchise in business simple

08.07.2023

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

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

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

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

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

All this will be discussed in today's article.

1. What is a franchise - we give a definition

The classic wording is as follows.

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

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

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

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

What is a franchise in business: definitions of the concept + description of the objects of the franchise package + what is included in its cost + 7 types of franchise + pros and cons of franchising.

The process of building your own business, which will become successful and famous, is similar to conquering Everest. Concept creation, search for premises and personnel, marketing activities, financial calculations and forecasting - and this is only a small part of what remains to be done.

You can go the other way - buy a ready-made business. But in this case, you need to have good knowledge in the field of entrepreneurship and economics. Otherwise, there are great risks of becoming the owner of a loss-making business, which at best can be kept afloat.

And there is a third option - to work according to the franchising scheme. In this article, we will similarly discuss what a franchise is in a business, what it involves, and what benefits and disadvantages it brings.

Basic concepts of what a franchise is in business

1. Franchising and franchise: is there a difference?

Those who at least understand the principle of how a franchise works in business have probably heard of franchising. And this is not surprising, because these two terms are closely interconnected, or rather, one is part of the second.

Franchising is a form of entrepreneurial activity / model or scheme of doing business, in which one corporation (company) on paid terms transfers the right to another to use a trademark (brand) along with established technologies and principles of production, trade or provision of services.

Franchising parties have their own names:

company that owns the trademark franchisor (franchisor);
an entrepreneur who joins a trademark on paid terms - franchisee (franchisee).

Let's analyze the concept on an example, from which we will find out, in business.

There is a company called "N", which owns a chain of popular coffee shops and operates on a franchise system, and there is also an entrepreneur:
who wants to start their own business,
having start-up capital;
little knowledgeable in matters of doing business, but willing to work hard.

And both parties are interested in each other. Franchisor :
expands and scales its business and market power;
receives cash after the sale of the franchise;

Franchisee:
on paid terms, receives an “instruction” for action and the opportunity to work under the auspices of an already well-known coffee shop chain;
saves time on studying and building a case.

After the conclusion of the contract, the franchisee becomes a full-fledged owner of the franchise, opens a coffee shop cherished for him and works under the name of an already promoted and well-known network of establishments.

2. Definition of the concept of what a franchise is in business.

And already from the above example, it becomes clear what a franchise is in business:

it is an acquired right to operate under the name of a certain trademark;
a franchise agreement under which the franchisee has the right to operate under the name of a well-known brand, following a certain business scheme;
a set of benefits, resources, technologies and privileges that the franchisee receives.

Each cooperation agreement is individual, and the owners of large companies put forward their own requirements not only for franchise buyers, but also for how they will conduct business. For example, this is a single design and style of the premises, the uniform of employees, work regulations, a clear list of services or goods.

3. Franchise objects.

By purchasing a franchise, the franchisee, within the limits of the agreement, can receive:

Brandbook

This is a complete guide to doing business, which includes: the use of a trademark (logo, slogan), the rules for choosing and designing a room, as well as its compliance with company standards, requirements for employee uniforms, packaging of goods or regulations for the provision of services.

Note: a brand book is the embodiment of a business ideology and a business strategy. The place, the design of the premises, the assortment or list of services, the strictly regulated production process - all this determines the uniqueness and recognition of the brand.

Tailored business plan

Support at the stage of starting a business
This includes assistance in finding and evaluating premises, recruiting and training staff, and registering a business.
Technologies
Here we are talking about developed know-how, production equipment standards, ready-made work instructions.
Often, a franchise network already has its own official website and a well-established PR strategy.
This may include a dedicated web page, maintenance of an advertising company, supply of all necessary information resources.

Regular visits, consultations, assistance in the preparation of financial and accounting reports, legal support, exchange of experience and provision of advanced technologies, replenishment of the product range - all this can also be included in the franchise package. But again, its fullness will directly depend on the company that sells the franchise in business.

4. Related concepts or how much does it cost to buy a franchise?

Since it is often new entrepreneurs who are interested in the question of what it is, they certainly have an interest in what is required of them.

The diagram below clearly demonstrates the relationship between the parties - the franchisor and the franchisee.

And in addition to complying with the requirements for the business being opened, and sometimes for the entrepreneur himself, financial conditions are put forward on which partnerships will be built.

So in due time the franchisor will invest a lot of resources and time in building not just a working, but also a successful business model, then he will not share it just like that.

The main financial income that the franchise seller receives:

Lump sum is a one-time payment for the purchase of a franchise. That is, the franchisee pays for the right to use the trademark and all its components strictly according to the contract. If the contract provides for the moment of its extension, then the payment will be collected again.
There is no single formula for calculating this payment, since many factors affect its size. But the franchisor himself includes in it the cost of resources that he will spend on support in opening and maintaining a franchise business.
Royalties are regular payments that are transferred to the franchisor during the entire term of the contract (monthly, quarterly). It can be a percentage of the sale or a fixed amount.
It is this contribution that “feeds” the franchisor. The funds received are spent on the development of the network, the improvement of technologies, as well as the formation of profits.
Marketing fee- payments that cover the costs of the franchisor for an active advertising campaign, promotions. These fees are not present in all companies, and most often they do not apply to those franchisees who are independently engaged in their promotion.

An important point that many overlook is the availability of start-up capital to open a business. That is, in addition to paying the amount of the lump-sum contribution, he must invest in the business.

Again, it all depends on the specifics and scale of the case. Some companies require franchisees to cover 100% for starting a business, that is, they themselves need to pay rent, make repairs, purchase equipment, and so on. Others are ready to reimburse part of the costs.

Franchise types

It is not enough to know what a franchise is in business, you also need to understand what types it is:

Franchise type	Her description
1. Classic (standard)	One of the most common types of franchise in world practice. It has the following features: large lump sum, periodic payments to the franchisor; visible and strict control over the franchise owner.
2. Free	This type of franchise has taken root well in the CIS countries, under which the franchisee is free to develop his business without the consent of the parent company.
3. Import- replacement	Its appearance is due to the fact that in our market there are still not many Western brands on goods or whose services are in demand. Therefore, companies acquire the technology, but produce the product already in their own country, thereby promoting it through franchising.
4. Silver (turnkey business)	The company independently opens and promotes affiliate and then sells it. With this type of franchise, the franchisee pays monthly deductions, but at the same time is engaged in business and immediately receive income.
5. Gold ("master franchise")	Buying this type of franchise is only available for experienced businessmen who have big investments. When signing a franchise agreement The franchise owner obtains a monopoly on doing business in a certain region (city, region).
6. Rental	Such a franchise is built on the principles of the usual us rent. The franchisor independently opens a point, and then rents it out for a certain period. In advance specifies the ratio in which distribution of income or profits.
7. Corpora- active	This is a great option for real beginners, who are just starting the basics of entrepreneurship and finance. Here almost everything will be controlled brand owner, which entails restrictions in the actions of the franchise buyer himself.

Pros and cons of franchising a business for both parties

Anyone who is interested in what a franchise is in business probably wants to know:

Why would a franchisor sell the rights to a business?
Why would a franchisor work with people who know little about business and finance?
What are the benefits for the franchisee?
What are the "pitfalls" awaiting the franchise buyer?

1) Advantages and disadvantages of a franchise in business for a franchisor.

After the business indicators show a positive trend, an ambitious entrepreneur thinks about expanding his “brainchild”. This can be done by investing in network development or by creating a franchise.

But does it make sense to share your knowledge and technologies, which took a lot of time and money to collect? Yes, and this is beneficial for several reasons:

Network development and entry into new markets

This requires a lot of money and time, especially if there is a desire to conquer not only the regional, but also the national market.

And you can do this with relatively little personal equity by selling a franchise.

Getting extra income

The accumulated instructions and personal secrets of doing business are not distributed to everyone, they are sold for money. The same applies to the recurring costs associated with supporting the franchisees, because they also pay for this.

Great return on franchised outlets

The franchisee is more interested in getting a positive result and maintaining the image of the business than a hired manager of some branch, since the first one invests his own money and wants to study, and the second one works for a salary.

High rate of brand awareness increase

It is quite difficult and costly to quickly open several production or retail outlets. And this is one of the factors that affects the popularity of the brand and its recognition in several regions.

And franchisees are very helpful in this matter, as they open a business in their cities, thereby informing consumers about the product.

But there are also disadvantages and risks that the franchisor may face:

Lack of privacy

When selling a franchise, the franchisor transfers to the buyer not only the rights to use the brand, but also all developments, technologies and know-how. This will increase the risk of information leakage.

Loss of income

The franchisor receives only a certain percentage of the gross income of the franchisee's business. This figure is much less than if the company personally opened a branch or representative office.

The need to unify accounting and reporting programs

The franchisor must develop a unified accounting and reporting system, which entails certain difficulties and additional costs. In addition, there is a high probability that franchisees may distort the data in their favor.

Difficulty controlling the franchisee

This is especially true for representative offices that are located far from the main office or abroad.

Traveling long distances to carry out inspections or hiring authorized persons who will be responsible for a certain area of \u200b\u200bnetwork coverage entail additional costs.

Preparing potential competitors

The practice of buying a franchise for learning and gaining experience is quite common. So, many, having studied the kitchen from the inside and having saved up money, go on a free swim, thereby making good competition.

Franchise and franchising in business. What it is?

What are the pros and cons of franchising a business?
popular franchises.

2) Benefits and "pitfalls" of the franchise in business for the franchisee.

What does a future entrepreneur get if he decides to invest his personal savings in a business:

What are the disadvantages of a franchise buyer?

Additional costs for opening and operating a business

Here we are talking about a lump-sum contribution and monthly deductions. When deciding to run a business on your own, you do not need to “share” your profits and savings with anyone.

Work strictly within the franchise network

Expansion of the assortment, development of a new design, promotions - all this either requires coordination with the main office or is completely impossible.

P.S. This does not apply to those companies that provide freedom of action.

Conclusion of a contract for a fixed period

The option to “try” the business and leave if something happens will not work. The franchisee must work until the end of the contract or pay a huge fine.

Those who know what a franchise is in business have some advantage, because if they wish, they can work under the auspices of a famous brand. In addition to support, training and gaining invaluable experience, it becomes possible to do what you love and gain financial independence even with a minimum of knowledge in the field of entrepreneurship.

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Businessmen are often advised to start as a franchisee rather than build a completely new business from scratch. Despite the large amount of information on the network, many people have a question: what is franchising in simple terms, what are its advantages and disadvantages, how to choose the right franchise, how much money is required for this? Let us consider in more detail the advantages of a franchise, the main types of such a business, tips on choosing a direction that will be relevant specifically for your region.

What is a franchise?

In simple terms, a franchise is a ready-made business, for the right to use which you pay an initial one-time fee (package fee) and royalties (regular contributions to the franchisor - the person who granted you the right to use the brand). Franchising has a number of advantages compared to a completely new startup, as the proposed product is already well-known and occupies its own niche. In addition, the franchisor provides a complete package of developed business processes and promotional materials, with which you can deploy activities in the shortest possible time.

The most popular types of franchise:

Public catering. This area occupies almost 15% of the total turnover in the franchising business in Russia. It includes (the opening of coffee bars), franchises of pizzerias and fast foods, restaurants and specialized cafes.
Production area.
Retail trade (boutiques of clothes, shoes, haberdashery, goods for children, etc.).
Services for business.
Services for the population. These types of businesses include the opening of gas stations (), beauty salons, fitness clubs, etc.
Mass media (newspapers, magazines).

Franchising - what is it?

Franchising is a type of business organization that provides for the temporary transfer of rights by the business owner (franchisor) to a novice entrepreneur or legal entity (franchisee). Franchise business is carried out according to clearly defined schemes and technologies, developed standards and business processes, under the trademark of the franchisor.

A franchisor is a company that gives the right to dispose of its trademark, technologies and business processes.

A franchisee is an entrepreneur or a company that pays for the right to use a "promoted" trademark, its technologies and developments in the field of production, trade or provision of services.

In simple terms, you are buying a ready-made successful business that will quickly begin to make a profit. For this, the franchisee pays a one-time amount, which can vary from 5,000 to several million rubles, depending on what is included in the franchise. For example, industrial franchising companies can supply machines, technologies and raw materials to a budding business franchisee, trading companies - furniture and shop equipment, the first batch of goods for sale, etc.

Other costs are royalties - a monthly deduction to the franchisor for the right to use the brand. Some companies also include advertising fees in their mandatory recurring payments, which are determined as a percentage of the total advertising budget.

Franchise types

Depending on the terms of the franchise agreement, the following types of franchises are distinguished:

Classic. Availability, monthly deductions, control of actions by the franchisor.
Free. In such a scheme, the franchisee adheres only to the basic rules of doing business, has freedom of action and pays a minimum royalty.
Import-substituting. Providing franchisees with technologies that allow them to create products similar to those produced under a well-known brand.
Silver. Creating a turnkey business in a certain region and providing it to franchisees at a percentage of the profits.
Golden. Purchase from the franchisor of all rights to use the franchise in a certain region with the right to freely conduct business in a convenient way.
Corporate. A franchise in which the owner clearly prescribes all the conditions for doing business and controls their implementation.

Benefits of the franchisee

Many entrepreneurs who want to start their own franchise business are faced with the choice of starting a franchise business or following their own path, going through the bumpy path of their own mistakes. Others choose without opening a business, most often providing private services.

Benefits of the franchisee:

Ready sales technologies and business scheme.
Consultations of the manager of the franchisor company.
Advertising support.
Assistance in starting a business - as a rule, a franchise agreement includes the selection of premises for trade or production, the provision of industrial or commercial equipment, assistance in the selection and training of personnel, document flow, business schemes, etc.
Minimizing risks at the start of a business. Franchising is a proven business.

The disadvantages of working under a franchising agreement include the need to make a lump-sum fee (in some cases this is a rather tangible amount), regular cash payments to the franchisor, and clearly regulated actions. In addition, the franchisee is obliged to purchase goods, equipment and supplies only from the franchisor, even if there are products on the market of higher quality or at a more reasonable price.

In simple words, it is better to choose a franchise for those who are not at all familiar with running a business and the type of activity in which they are going to work. If you have already worked in a similar field before, know the features of production or trade, the market, suppliers, large customers - in this case, you can start a business on your own.

Benefits of the franchisor

Why would a franchisor company give away the right to conduct business under its own trademark?

In simple words, this gives the company a number of the following advantages:

Increase in sales. Stable level of sales, since franchisees are most often required to maintain a certain level of sales under the franchise agreement.
Rapid promotion of the brand and increase brand awareness in various regions.

For most large companies, it is much more profitable to sell a franchise to a local entrepreneur or legal entity than to open a branch, hire employees and carry out other organizational activities related to the opening of a new division. At the same time, each franchisor puts forward a number of requirements for the franchisee - most often it is the availability of funds to make a one-time payment, business experience in this area (desirable, but not necessary), registration of an individual entrepreneur or legal entity (desirable, but not necessary).

Major misconceptions about franchises

The most common myths associated with franchising:

A franchise is the purchase of a brand name. In fact, the franchisee buys the right to use the brand for a clearly defined period, which is prescribed in the franchise agreement.
Any franchise provides an opportunity to quickly make a profit. In fact, you need to be very careful in choosing the type of activity. What sells well, for example, in a metropolis, may not find its buyer in a small town. Or, if a similar type of business is already thriving in your area, it may not be economically feasible to create a clone firm.
Each step of the franchisee must be coordinated with the franchisor. The areas of responsibility are prescribed in the franchise agreement, it can be both the precise implementation of absolutely all business processes, and some freedom of action in a number of organizational issues.

Tips for those who want to start a franchise business

Tip #1:
To select the franchise that is right for your region, you need to conduct a thorough market analysis. That is, to see who sells what, who produces what in your city or locality, what goods are most in demand, etc. If a certain product or service is very popular, study the demand - will there be another company that will provide the same or similar product, or will the business turn into a competition? And in such a struggle, the one who started the business most often wins, since he already has his own circle of customers, suppliers, etc.

Tip #2:
How to raise funds to start a franchise business? It could be a bank loan that you can get for a startup. This will require the development of a detailed business plan, which is written in accordance with the standards of this financial institution. But banks, as a rule, are not very willing to finance a new business without a collateral object (real estate, vehicles, other liquid assets). Another financing option is to raise funds from several sponsors. The collection of money is carried out on the terms of the allocation of a share in the future business, a percentage of profits or other preferences.

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A franchise is a profitable investment, especially if you have no business experience. A well-established scheme of work and the use of a well-known brand can minimize the risks of a startup and reduce the payback period of the project. The choice of a franchise should be made taking into account the available funds, personal knowledge and experience, the availability of a free niche in the region in which you plan to start a business. When attracting borrowed capital (bank loan, private financing) for a lump sum, consider the profitability (profitability) of the business offered to you.

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Any person who has set out to start his own business, the first thing he starts to think about is what to do. There are many options, but conditionally they can all be divided into 2 groups. The first is to come up with something original, original. And the second is to use someone's well-known brand. Start your own business under a well-known trademark. Use long-proven technologies, paying the brand owner a predetermined percentage of their profits.

Anyone who owns modern technologies, popular products, well-known trademarks, ready-made schemes, which, in turn, allow to establish a new business to one degree or another - such a seller is called franchisor. After your personal appeal, the franchisor is already starting to create a similar business, but for you. The one who, in turn, turns to the businessman for help, is called just the buyer franchises.
At the same time, it is also necessary to note the moment that immediately when making the purchase of any franchise, you will already be obliged to bear the subsequent costs yourself and also provide your seller with a certain part of the profit in the form of the so-called royalty and also lump sum.

Franchise Package Components

A franchise usually has the following elements:

The presence of an already created design that makes a profit.
All the necessary equipment for doing business.
Directly the project itself, executed necessarily competently.
Certain standards of the service process, which at the same time work quite effectively.
Advertising and also other promotion.

In order to be able to understand for ourselves how exactly it all works (for example, if we have a franchise for some kind of restaurant), then we don’t have to actually understand the various aspects of the restaurant business itself. It will also be enough just to purchase a franchise and it, in turn, will already bring us some kind of profit. If you believe the average statistical indicators, the success of various franchise organizations is close enough to the ideal, and the business itself from scratch and without experience is similar to the well-known lottery.

What is a lump sum and royalties?

"Lump sum" - this is the so-called cost of the franchise itself, for which, in turn, you pay only once. You pay the owner of the franchise itself for the first use of its already created trademark. For the scheme of production of goods or provision of services that has been developed over the years. And also for working with his products directly or, in another case, various technologies in the field of innovation.

"Royalties"- these are certain stable payments that the franchisees themselves make already to the account of their franchisor. If it is, for example, a cafe, then every month about five percent of the total profit of this particular organization. After all, the owner of this franchise himself no longer offers you any specific or specific product for sale. In this case, royalties are already considered his main and main income. Franchisors are in fact always interested, of course, in the success of just such a business. After all, the more you earn specifically, the more he gets as a result.

Franchise- this is also a type of popular entrepreneurship, the main and basic principle, so to speak, of which, first of all, is the very transfer of the right to use a particular brand, that is, in other words, the name of the company itself. It turns out in such a way that, as a result, a large and at the same time strong organization, in turn, grants the right to a relatively small one, which is beginning to have the right to be called exactly the same as itself. By its actions, it takes upon itself all the necessary assistance, including support in some vulgarized areas of business, for which the new company eventually pays a certain amount of money.

In such a transaction, a contract is concluded as a result. It turns out that a businesslike, successful company trains its new organizations. It teaches how to carry out all the work, how to conduct the activity itself in a variety of directions, how to achieve a decent profit.

conclusions

Many entrepreneurs actually believe that franchising is a reliable mechanism, in their opinion, in order to be able to first organize and then make their own business known. Practice shows that in reality, out of ten companies that, in turn, start working, as many as eight end up making a profit and payback almost immediately, and then pay off in a period of about six months to eighteen. After about five years, they already become really large, quite successful firms and then do not terminate the already signed contract.

In order to see for yourself that a franchise can really give other businessmen the opportunity to realize themselves, you can look at real life examples, of which there are a lot at the moment. Check out the history of the development of modern franchises. Now, thanks to this article, you also know what a franchise is in modern business and how it is approximately created.

Hello, dear readers of the “site”! This article will focus on a franchise (franchising) - what it is, what documents the franchisee receives, what types of franchises there are and what are the advantages and disadvantages of this type of business activity.

After all, this is a good way to start your own business and earn money without having any experience in business. The presented publication is useful to study for absolutely everyone (including beginners and successful entrepreneurs).

About what a franchise is in simple words, what is the purpose of franchising in a business, what types of franchise businesses are - read further in our material

1. What is a franchise and franchising in simple words - definition and meaning of terms

First of all, let's look at what a franchise is in simple terms.

Franchise(from fr. franchise- prerogative, advantage) is the object of a franchise agreement, the transfer of a brand and business model to a partner on favorable terms.

Franchising(franchising) is a business model in which one company transfers to an individual or another company the right to conduct an identical business under its trademark for an appropriate fee.

Thus , franchise is the subject of the transaction franchising- the deal itself. Do not confuse these definitions!

The parties to a franchise transaction are called the franchisor and the franchisee. Franchisor - franchise company franchisees , respectively, is the party acquiring it.

An excellent example is KFC restaurant . All cities have this fast food, but the organizers are local entrepreneurs who have opened a franchise business and make a profit.

2. What is royalty in a franchise + other terms of franchising

Apart from franchises , franchisor And franchisees there are other specific concepts to be aware of. We present them below:

know-how - information that helps to conduct business, and is known only in this organization. Transferred to the franchisee along with the license.
License - documented right to conduct any business. Acts as an object of franchising along with the brand and know-how.
franchise agreement may be called license agreement(in the case of a transfer of intellectual property) or concession agreement. The essence of this does not change.
The main point of such an agreement is lump sum - payment for the purchase of a trademark or a certain stock of goods. A lump-sum fee is paid each time the contract is renewed.
In addition to this payment, the franchisor also receives royalty . Franchise royalties - This is a regular periodic fee for using the franchise. It can be paid as a fixed amount or as a percentage of the profit. All this is stipulated in the contract and is the main interest of the franchisor, together with a lump-sum fee.

3. A package of documents that the franchisee receives

The starter kit that the franchisee receives is called franchise package .

This set of documents includes:

legal documents regulating this type of activity ( licenses, permissions and so on.);
brand book, according to which the retail space is designed;
personnel management policy;
manager's guide.

Besides The franchise package may include various trainings for employees, software, business benefits and much more. All these documents are aimed at ensuring that the franchisee understands the corporate spirit of the company as soon as possible and begins to work in accordance with the standards.

Take note! Franchise companies offer their services online. You can get acquainted with their offers, compare conditions and leave an application on special resources.

In addition to the main franchise, there is also master franchise - the businessman who bought it remains the sole owner in a certain territory (city, region, region). Naturally, the lump sum and royalties will be large, but the income of the entrepreneur is also higher.

At its core, a franchise is one of the varieties.

4. Pros and cons of a franchise business

Like any business activity, a franchise business has pluses (+) And cons (−) .

Positive parties when buying a franchise:

Minimum risk. Buying a franchise, a businessman skips the stage of creation and promotion. Before him, this had already been done by the owner. Thus, profits do not have to wait for years. And make a mistake in management, incorrectly assess the market situation almost impossible as the business is regulated by the franchisor.
An established brand. Brand recognition is already there, it makes no sense to spend money on advertising.
Quick first profit. Since there are no costs associated with opening a new company (such as advertising, rent, etc.), the first profit begins to flow in the first month of operation.
Decreased advertising costs. Due to the fact that the company's trademark is already "promoted", the lion's share of the budget is saved. After all, it is well known that advertising costs more than 40 % of profit during the first period of operation of the enterprise.
Possibility of training and consultations at the franchisor. The interest in the success of the branch is not only among the franchisees, but also among the owner of the trademark. Therefore, control and timely correction of errors are present at all stages. Support and assistance are guaranteed to help you reach a successful level of work.

Now about the inevitable negative aspects of the concession:

Lack of room for franchisees to maneuver. It will not be possible to make independent decisions, because the whole process is regulated by the seller of the brand. To introduce any innovations, they must be agreed with the franchisor.
Mandatory payments. Lump sum and royalties, minimum mandatory purchase of goods- for these obligatory payments it is always necessary to adjust the received profit. Whereas a free entrepreneur disposes of the income received at his own discretion.
High transaction cost. Famous brands charge a lot for their trademark and business model, especially for a master franchise.
Total control by the franchisor. In addition to, perhaps, a free concession, the trademark owner will tightly control the entire business process. For experienced entrepreneurs, this is not very desirable.
The impossibility of changing the current model. Even if your marketing kit is more successful and your work strategy is better, you will not be able to implement them. All processes are strictly regulated.

Thus, before concluding a franchise agreement, it is necessary to evaluate all the pros and cons, and decide which prevails. And then start work.

5. The main types of franchises - 7 varieties of doing business

Franchising - this is a business model so popular in the world that several types of franchises have developed that have certain features. Let's talk about each in more detail.

View 1. Free

The most popular type of franchise in Russia. More degree of independence franchisees from the franchisor and relatively small ↓ royalty.

View 2. Classic

The most popular type of franchise involves obtaining lump sum And royalty. The franchisor reserves the right to monitor the case, make its own amendments and check the franchisee for the identity of the business.

Type 3. Import substitution

In the light of economic sanctions and the import substitution program, the problem arose to provide the consumer with products of European quality, but Russian-made.

The object of an import-substituting franchise is purchase of imported technology, and the production itself is carried out on the territory of the Russian Federation.

View 4. Silver

It implies the purchase of a ready-made business that does not require additional investments and “promotion”. The owner of the brand himself opens a division of the company and gives it on a turnkey basis. As royalty here are monthly deductions as a percentage of profit.

View 5. Corporate

It is distinguished by the active participation of the franchisor in the management of the branch. Suitable for beginner businessmen, as they will have the opportunity to learn management.

The possibility of maneuver with this type of franchise is small, but the risk of making a mistake is minimized.

View 6. Business for rent

Leasing out a ready-made business franchisor receives a regular income and spends his free time on more interesting projects. Franchisee he uses a ready-made case, without wasting time on opening it.

In this case, the profit is distributed among the partners in the percentage determined by the agreement ( For example , 50 /50 )

View 7. Golden

Redemption of the monopoly right to conduct business in any region ( master franchise ). It has high ⇑ rates, but it also pays off quickly and brings good profits.

In any case, before investing, you must realistically assess your potential, both financially and morally. Do you have enough ambition and endurance, can you risk a certain amount- you decide!

6. Examples of franchises - 5 most popular

In addition to well-known fast food restaurants such as McDonald's or Subway, there are still attractive companies. Let's dwell on each of them in more detail.

TOP-5 franchise offers in Russia in 2019:

"Pyaterochka" - the most popular network of grocery supermarkets. More 5 000 stores operate under this brand in Russia. Known for introducing the concept "reverse franchising", that is, there is no royalty, but there is agent's commission for the sale of goods.
33 Penguins is a chain of ice cream parlors that also sell pastries and desserts. Works on the territory of Russia and the CIS, has 42 own points of sale and 1 700 franchised points. innovation 2016 year was the release of a product line for vegetarians, diabetics and healthy lifestyles.
Ascona is the largest manufacturer of mattresses, beds and pillows in Russia and Eastern Europe. 285 franchise outlets, 398 own stores. Owner "Stamps of the Year No. 1" V 2011 And 2013 years.
Independent laboratory Invitro is a leader in the provision of services in the field of medical laboratory research. High reputation in the field of franchising allowed to attract more 60 % of franchisees who opened not one office, but two or more.
champion – a network of football clubs for young children. 261 franchise business and 80 own allow to reach a large audience of children aged from 3 before 7 years. Franchising is developing 2014 years and quite successfully.

All listed corporations allow franchisees to earn from 750,000 to 7,500,000 rubles per month .

7. Answers to newbie questions (FAQ)

Question 1. How to choose a franchise for a business?

The main criterion here is the amount that you are willing to spend on the acquisition. Here is a suggestion - count only on the amount who are willing to risk .

Having decided on the price category, select a few of the most attractive projects for yourself. Check out their franchising policy, affiliate management stakes and product line. All this information can be easily found in the public domain on the Web.

The most interesting options for investing money, which will quickly pay off the start-up costs and bring you profit, are:

sphere of media business;
organization of public catering;
trade and production of building materials.

Choose the option that is closest in spirit to be fully involved. It makes no sense to choose an activity that you are not interested in. You can discuss the nuances and communicate with consultants directly on the website of the company of interest.

Question 2. Is a franchise business suitable for beginners?

Small business franchises are one of the safest options conducting business activities.

The risk of failure is practically reduced to zero, because the business has already been debugged, the brand is promoted, and control is carried out by the franchisor.

Question 3. What makes up the cost of a franchise?

The cost of a concession is made up of several factors:

brand awareness;
the amount of royalty and lump-sum contribution;
on the type of franchise (master franchise is always more expensive);
from the appetites of the brand owner.

Important! The more famous the company, the more branches it has, the more expensive ⇑ the cost of the franchise will be.

Question 4. Are there franchises with minimal investment and is it possible to do without investment at all?

Despite the fact that a business with zero costs and high profitability is blue dream all entrepreneurs, in reality this can not be .

Even when buying a branch no lump sum you will have the following expenses:

rent and repair of premises;
payment of wages;
other organizational expenses.

Do not forget about royalty , which under the contract is usually 10 % from profit. Of course, the costs will pay off in the first couple of months of effective work, which is much faster than when building your own company.

8. Conclusion + video material on the topic

As you can see franchising This is a very attractive way to invest money. A beginner will be able to learn how to do business from experienced partners, while making a profit. For business pros, a franchise is attractive because of its quick payback.

On the pages of the site you will find a lot of useful information.