In commercial franchising, the following types of franchises are distinguished. How does a franchise work in examples

When a person opens his own business, he has to face a lot of problems - to promote a brand from scratch, to develop technologies. In such conditions, it takes years to get a decent result. But at this time, competitors do not stand still, as the heroine said Carroll, « to stay in place, you have to run". That is why everyone who knows what a franchise is and how it works, tries to compare the possibilities of a franchise before investing big money in their business.

What is a franchise and how does it work? How to buy a franchise and what typical mistakes does the entrepreneur? We will try to provide as much information as possible.

What is Franchise in simple words

Franchise is when enterprises with established technology and a well-known brand allow other companies to use their name. In addition to the name, they also pass on other knowledge, such as production technologies, corporate standards, patent rights and inventions. This is the definition of a franchise. in simple terms.

The first company that comes to mind when we hear the word "franchise" is McDonald's, but franchising has much older roots. Isaac Singer, inventor of the famous sewing machine Zinger, in 1858, was the first to lay the foundations for the concept of franchising. He began to sell licenses to distributors in different parts of the country, supplying them with their own merchandise and training staff.

According to the formal definition, a franchise is a permission for a legal or natural person to use the benefits franchisor. At the same time, the one who acquires this right is called franchisee, and the whole business model is called franchising.

Sometimes this right is transferred free of charge, but more often franchisee obligated to pay for the benefit received. The fee is divided into two parts:

Lump sum. A one-time amount that is transferred at the conclusion of a franchise agreement.
. Monthly or annual payment.

Each franchisor develops own conditions which may differ significantly.

AT Russian legislation There is no such thing as a franchise. In Chapter 54 of the Civil Code of the Russian Federation, a definition of a commercial concession is introduced, according to which a complex of benefits is transferred by the copyright holder.

The aforementioned chain of fast food restaurants owns less than half of 36000 restaurants; most open on a franchise basis. gives you the right to use your famous brand, logo, menu and so on. Businessmen who own restaurants, in turn, pay fees (royalties), which are calculated as a percentage of sales.

This is the main compromise in the franchise relationship. Franchisor ( in this example McDonald's) allows other people (franchisees) to use the business model and brand awareness, and in return receives a percentage of the turnover.

What are royalties and franchise fees?

One of the most frequently asked questions is how much does it cost to open a franchise business? You can estimate the costs at the stage of choosing a franchise.

The initial payment in the form of a fixed amount is called lump sum, periodic payments for continued cooperation - royalty.

In exchange for the right to use the franchisor's name, product or technology, some or all of the following fees are usually required:

Lump sum– initial franchise fee, which is non-refundable. The size of the amount varies greatly, but the trend is as follows: the higher the degree of brand recognition, the more expensive the entry "under the wing" of a strong company.
paid on a regular basis monthly or quarterly) during the term of the contract. A kind of membership dues, in fact. Fixed amounts or percentages of gross sales - the options are different.
Tuition fee- some franchisors include training in the price of a lump-sum fee, some take it out as a separate line.
Advertising fees are contributed to the advertising or marketing fund of the parent company. This money is spent on TV and radio advertising, development and printing of POS materials (booklets, posters, flyers).
Franchise renewal (renewal) is the fee for renewing the franchise agreement.

Large franchisors often develop multiple brand entry schemes. Preliminary calculations of payback and profitability for a particular region are taken into account.

For example, the franchise 220 volt”is transferred free of charge, however, the partner undertakes to purchase goods only from the franchisor.

Franchise types

The word franchise translated from French means " benefit". As you know, benefits are different. Depending on how different franchisors allow their name to be used and what they offer in return, there are three main types:

business franchise;
commodity;
production.

Business Franchise

What is a business franchise? This is the most common type of relationship in which the franchisor offers an established business, including the name and trademark, to independent entrepreneurs. good example restaurants of this type are fast food. The franchise catalog contains both long-established brands - Papa Johns Coffeeshop Company, and new ones - " Food from the Champion", bar " Honey, I'll call you back».

The franchisee receives assistance from the parent company in the selection, planning and design of the premises, recruitment and training of staff, and development of the marketing component. Lump sums and royalties vary greatly, sothat it is necessary to carefully look at the conditions of each particular company. This type of franchise is often referred to as a "turnkey business" as the franchisee gets almost everything they need to start their own business.

Commodity franchise

The franchisee receives the right to distribute the product manufactured by the franchisor. Well-known commodity franchises are, for example, or any other car manufacturer, some brands of clothing and shoes: Incanto, BAON, ALBA.

This type of franchising often does not involve royalties. The franchisee is required to purchase a certain volume of the franchisor's product or range of products. And he provides national advertising campaigns, provides logo and trademark.

Production franchise

The manufacturer grants the right to manufacture and sell goods using its brand and trademark. This type is widespread in the food and beverage industry, for example -.

Another technical point that is important to understand when looking for a suitable idea for investing money. The rights that a franchise agreement provides differ greatly in one case or another.

What are the franchises

Direct Franchise- the franchisor grants the right to open one enterprise in the agreed place. The oldest and most simple form relationships. The disadvantage is this: if the franchisee has the desire and ability to open additional outlets, each time a new contract and new monetary contributions are required. That is, on the example of a clothing store: it is impossible to open another store without coordinating the issue with the parent company and without paying a lump-sum fee.
Multi-franchise- the buyer receives the right and obligation to launch a certain number of production / trading places in a certain area for a fixed period of time.
Master Franchise similar to the previous paragraph, but has one significant difference: the franchisee receives the right and obligation on its own behalf to sell the franchise in the territory approved by the agreement. The master franchisee becomes the franchisor in his region.

We emphasize once again: in the last two versions of the franchise agreement, a right and an obligation are provided.

If the franchisee does not maintain the contractual pace of development and expansion, this is punishable by: termination of the contract, penalties, transfer exclusive rights another businessman, etc.

In addition, there are the following types of franchises:

Free. The franchisee receives the right to use the brand, but his actions are not controlled by the owner of the rights.
Silver. In this case, the company opens a branch, organizes its activities, and only after that sells the right of temporary use.
Golden. Transfer of monopoly rights to conduct business under the brand name of the right holder in a particular region. The buyer of a gold franchise decides for himself how he will use the name and develop the business.
Import-substituting. This scheme is somewhat reminiscent of plagiarism. A businessman works in the country under the name of a well-known company, while not deducting royalties to it. What is it like " Adidas" and " Abibas”, The names are similar and there is nothing to complain about. However, this business has nothing to do with the original brand.

The Civil Code requires that every commercial concession agreement be registered with Rospatent. In this case, the franchisor must first register his trademark and technologies there. Theoretically, it is possible that McDonald's will miss the re-registration period, then any entrepreneur can apply for it.

Almost every industry has successful, proven business practices. We sell franchises of retail stores, beauty salons, fast food restaurants, factories and many others. For convenience, we have compiled some popular brands in a table - a mini-catalogue of franchises.

Notable pizza franchises

	Lump sum		Total investment	Payback period
Dodo Pizza	350 000	3-5%	3 000 000	1 year
Pizza Celentano	400 000 – 800 000	2%	2 000 000	1 year
papa johns	1 000 000	6%	10 000 000	2 years
Domino`s Pizza	2 000 000	7%	15 000 000	2 years

In the pursuit of profit, it is important to strive not only for momentary benefits. Ray Kroc, the founder of the McDonald's network mentioned more than once said:

"If I had a brick every time I said 'quality, service, cleanliness', I think I would cross the Atlantic Ocean."

What should be in the contract

A typical franchise agreement consists of several hundred pages. About, what is a franchise in simple words It's hard to explain, and even harder to do on paper. Therefore, without legal support, a businessman will not be able to figure out the intricacies. For example, the Civil Code contains the following rules:

The duration of the contract does not have to be specified. But if it is, it is necessary to agree on the condition of prolongation.
Only legal entities and individual entrepreneurs have the right to be parties to the contract, individuals this is not available.
It is impossible to conclude a contract in any other form than in writing.
The franchisor is obliged to teach his own technologies not only to the franchisee, but also to his employees.
The franchise buyer must comply with all requirements of the seller to ensure the quality of the product or service.

The contract also specifies control technologies, whether it is mystery shopping, passing exams or visits of controllers.

How not to fall for the bait

Upon entering the franchisor's website, the visitor blossoms with delight. And the investments are minimal, and the support is comprehensive, they promise bonuses and lure with gifts. It's all hosted on a single page site.

When it comes to signing a contract, a businessman finds a document in front of him on a hundred pages. This is not an exaggeration, this is exactly the size of a standard contract. Moreover, it was drawn up taking into account the interests of the franchisor. How the franchise works and how it protects the franchisee, he must take care of himself. Even if at first glance the offer seems tempting, you should only believe the contract written on paper.

When concluding a contract, it is worth attracting a lawyer, his payment will pay off many times over with subsequent savings. If you make additions to standard contract with McDonald's it will be difficult, then you can easily insist on the cancellation or change of several clauses in an agreement with a lesser-known company.

Questions to ask a franchisor:

When did the franchisor start selling the franchise? If the franchise is young, and the results of the franchisee's activities are not yet clear, this is another reason to think.
Is the business financially successful? Having seen the results of activities over the past three years, you can roughly orient yourself in the prospects of your own business.
How many franchisees have closed? The percentage of successes and failures is not a theory of probability, but specific numbers that give an idea of the chances.
What kind of support is provided? Premises valuation, staff training, payback calculation, advertising and promotion in a new region? What does the franchisee get besides the brand?

The short list of questions can and should be supplemented by questions that arise during the study of the proposal. And most importantly: business is not a statue carved in stone, everything flows and changes.

Pros and cons of a franchise

A business system that has been tested by time and tested more than once in different regions is the undeniable and main advantage of buying a franchise. Fill bumps on your own or copy the experience of a successfully developing and competing company?

Arthur Bartlett, founder Century 21 Real Estate: "The franchise has become the savior of free enterprise, it has given small businesses a chance to survive..."

Yes, the franchising business option does reduce the risk of failure. Not as much as the brochures of interested companies promise, but still. US statistics confirm that 90% of independent business projects fail within the first three years.

Compete with big business individual entrepreneur- difficult task. A recognizable brand, special conditions for cooperation are an obvious plus that a franchise gives.

“The world does not stand still. We don't deserve to be where we are unless we're ahead of the curve and take action. necessary measures to remain competitive, Fred DeLuca, founder subway.

The franchisor provides well-established business technologies that are constantly being improved: advertising, marketing, administrative support. Lack of knowledge and experience is not a problem - the franchisor provides training for the franchisee.

In many cases, the franchisee receives exclusive territorial rights, a monopoly on the allocated area. Of course, under the brand name of the franchisor. If the brand is successful and recognizable, it will “crush” competitors in the niche.

The sad fact is that some franchises achieve an 80% failure rate while others experience almost no failure.

Before signing an agreement, you need to carefully read the statistics: how many projects are successful, how many have closed. Talking to franchise owners is not the last thing; you don’t need to spare money and time for this item. Openingfranchise may seem like an easy way to run your own business. But some factors are not evident, and the idea is so tempting that the potential franchisee steps on the rake of unsuccessful predecessors.

Franchising is not a flexible way of doing business. Features of a particular area, which are well seen and understood by the franchisee, are often not obvious to the franchisor. Make changes to the business format, offer additional discounts to customers, choose a product in accordance with the tastes of buyers ( in retail store, For example) is not always possible.

If an agreement is signed that obliges the franchisee to expand the network, the business is obliged to work well and bring profit to the franchisor. Failure to comply with the agreements is a reason for the franchisor to refuse cooperation without compensating the franchisee for any damage.

Instead of output

You can already understand what a franchise is in simple words - this is an agreement that allows one of the parties (the franchisee) to sell a product or service using a trademark, marketing strategies and technologies to the second party - the franchisor.

Franchising is a progressive business method that benefits both parties.

In time " catch a jet" and " collect cream» on a new trend - the dream of any entrepreneur. However, here it is better to do the opposite. You need to look for a franchise that has already managed to establish itself. Steady growth, a low percentage of "burned out" franchisees - the only indicators that need to be guided.

Marriott, founder of a hotel chain: “My life experience shows that success is never final. We make decisions on the way to the final result.”

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04.04.2015

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

In our country, this type of relationship between large companies that own brands and small businesses has received a legislative basis in the form of a commercial concession agreement. Historically, a brand owner who rents out his name, production techniques and secrets of success is called a franchisor, and an entrepreneur who uses someone else's name is called a franchisee. Open franchise business - means to be able to use the trademark, rights and authority of the company, technology and secret commercial information large well-known company.

All types franchise business are similar in one thing: it involves two parties. One is a large, reputable, successful company interested in spreading its brand, the second is a small business, ready to start its own, but afraid of the risks associated with inexperience.

In the process of cooperation, one party receives a stable profit in the form of a percentage that the franchise brings . franchise business, in turn, has the opportunity to develop based on the experience of a large company. In exchange for a monthly payment of interest on income, the franchisee company receives a business that does not need advertising on its part. In addition, the franchisor can act as a guarantor for a business development loan.

Before choosing the right franchise for your startup, you should understand what they are. There are three main areas in franchising:

commodity franchising. This is one of the easiest and least expensive ways to start a business. It involves the sale of certain products major manufacturer under a concession agreement. Commodity franchising is most often found in the field of trade household appliances, cosmetics, clothes, shoes, etc.

Manufacturing franchising. The second most common among start-up entrepreneurs. In this case, the franchisee buys the right to produce goods using equipment and technology patented and owned by the franchisor. The owner of the brand at the same time carefully monitors the quality of the products at the output, because his reputation depends on it. The franchisor provides the ward with equipment (under a lease, sale or leasing agreement) and raw materials. An example is such franchisors as Fanta, Coca-Cola, Pepsi, etc.

· Franchising in the service sector. In this case, the franchisee acquires the right to carry out some type of activity to meet the needs of the client. Examples of this type of brand rental include beauty salons, travel companies, restaurants and coffee shops. The franchise extends to a whole set of patent rights. For its part, the tenant undertakes to maintain a unified design of the premises, style and quality of customer service.

For those who want to have their own business, but are not ready to start on their own, a franchise gives a chance not only to make a profit, but also to gain tremendous comprehensive experience.

Traditionally, franchising is divided into the following types: marketing, commodity, industrial, business. Forms can be distinguished regional franchising and sub-franchising. Let's consider each type in more detail.

Sales franchising- used by the manufacturer of goods to build a single branched distribution network, the functioning of which is under his control;

Commodity franchising. " The first to use commodity franchising were the Singer Sewing Machine Company (a company that produced sewing machines) and General Motors Corp "Dovgan V.V. Franchising: a path to business expansion: (Organization, technology, methods, aspects). P. 40 . This type franchising is the transfer of exclusive rights to sell products manufactured by the franchisor and under its trademark in a certain territory. The franchisee becomes the sole seller this product in the assigned territory and the exclusive representative of the franchisor's trademark. The main condition of this transaction is that the franchisee undertakes to purchase products only from its franchisor and completely refuses to sell similar products from other companies that can compete. Thus, commodity franchising is characterized by a narrow specialization of the franchisee in the sale of one type of goods and services and receiving a fixed share of the total sales. There is also a relatively low degree of regulation of duties due to the homogeneity of activities. Using commodity franchising, the franchisor not only increases the sales of its products, but also regulates, assigning certain territories to the franchisee, the distribution of sales between different regions, expanding the geography of the sales market. The main differences between commodity franchising and dealerships are: greater attachment to the franchisor's trademark, greater provision various services franchisee franchisee and exclusive marketing of products.

In the US, the first franchising became popular at the beginning of this century as a way to sell cars and gasoline. In that period of time, franchising was created at the level of distributors (distributors). This approach gave a guarantee to manufacturers that their products will reach buyers exactly in the form in which they were created. At the same time, the name and trademark of the company were widely used and brought all the benefits to consumers. Currently, automobile and gasoline companies are not considered franchisors under US law, while many other companies widely use franchising as a way to distribute and distribute their products. If goods and services are not branded, they are not included in this category.

Industrial (production) franchising- represents the transfer of rights to manufacture and sell under the trademark of the franchisor of products using a patented production technology, materials, raw materials or the original component of the product. In this case, a company that owns the technology for manufacturing a certain product sells raw materials for manufacturing to local or regional factories (for example, a soft drink bottling plant). A small firm here not only acts under the brand name of the franchisor and sells its products and services, but is also included in the full cycle economic activity a large corporation, fulfilling the requirements of the technological process, quality, staff training, fulfillment of the sales plan, and operational reporting equal to it. This form provides for close contact between the franchisor and the franchisee, detailed regulation of activities and a high degree of responsibility of a small business.

This type of franchising is most widely represented in the production of soft drinks. Each of the local or regional bottling and packaging plants is a franchisee from the main company. For example, the American Coca-Cola, the leader in the world market of soft drinks, and second only to its competitor PepsiCo in Russia, began active operations in the Russian market in 2005. By developing a program to create several Coca-Cola branded beverage plants in major cities Russia. total amount investment in 2 projects in Bashkiria and Yekaterinburg is estimated at 30 million dollars. At the same time, the program for organizing the production of Coca-Cola drinks is not built quite normally. It is not Coca-Cola itself that invests, but its partner, Inchape Plc. with the attraction of Russian investments. In essence, the creation large network plants based franchise agreement, under which Coca-Cola transfers technology and concentrates to new enterprises. And the plants are managed by Inchape enterprises and partners from Russia. Thus, despite the fact that Coca-Cola does not invest itself, leaving it to Inchape, together with its partner it controls the development of enterprises. This experience has been followed by other companies who sell concentrates and other products needed for production to local bottling companies, who then blend the concentrates with other compound products and bottle or can them for distribution to local dealers. It goes without saying that the product in New York should not be different from the product in San Francisco.

"The first commercial concession agreement containing industrial property and registered with the Patent Office of Russia (Rospatent) in June 1996 was an agreement between Colgate-Palmolive USA (right holder) and Colgate-Palmolive JSC Russian Federation (user), according to to which, along with the right to use the trade name, the Russian user was transferred to use 35 inventions, 7 industrial designs in the field of production of hygiene items and means, about 60 trademarks, technical, technological, commercial know-how O. Novoseltsev Evaluation of commercial concession. // "Economy and Law" No. 3, 2000, p. 104-105. ;

business franchising is the most popular way of franchising. This type implies the transfer of not only a trademark, but also a business technology developed and tested by the franchisor. The use of business franchising ("business format") is typical for enterprises Catering, rental and consumer services, business and professional services to business and the population. In this case, the franchisee undertakes to act in accordance with the franchisor's market strategy, with its rules for planning and organizing management, to comply with technical requirements quality assurance standards and conditions, participate in training and production development programs, be fully responsible for economic results his work. This type of franchising provides for, of course, close contact between the franchisor and the franchisee, constant exchange of information, detailed regulation of activities and a high degree of responsibility of the franchisee firm. It should be noted that in some franchising systems, the difference between product and business franchising is sometimes not so obvious (for example, Baskin-Robbins ice cream shops);

In this method, the franchisor licenses individuals or other companies the right to open stores, kiosks or entire groups of stores to sell a range of products and services to customers under the franchisor's name.

Thus, this is franchising for the type of activity, i.e. the inclusion of a small enterprise in the full production and economic cycle of a large corporation. Hardly the most popular view franchising, in which the lead firm licenses to private firms or companies the right to open their own business selling products and services under the franchisor's name (for example, rental and personal services, business and professional services businesses and the public, shops or fast food chains, hotels). On the part of a large corporation, equal requirements are imposed with it on technological process, quality, as well as staff training, selection of a site for the construction of an enterprise, and other services (sales assurance methods, operational reporting, etc.).

Business franchising requires the franchisee to pay ongoing fees as well as make contributions to an advertising fund administered by the franchisor. The franchisor can lease fixed assets to the franchisee, offer him financing; he also has the right to act as a supplier for his franchisees.

One of the first signs of business franchising was the opening of the first fast food restaurant of the global McDonald's franchise system. At the moment, one can observe a very active development of this franchisee, the opening of new eateries, etc.

One more company dealing with business franchising should be singled out. This is the Russian-Venezuelan enterprise "Rosinter". Under his jurisdiction are such restaurants as: Combis, Rostik, Patio Pizza, Artistico, Santa Fe, American Bar & Grill. At the moment they are selling franchises on Rostik's Patio Pizza.

"AT last years The classical franchising model has changed in the direction of providing the franchisor with additional opportunities for rapid development at the lowest cost. While there are many variants of classic franchising, three are the most commonly used. These are regional franchising, sub-franchising, developing franchising with additional opportunities for rapid development at the lowest cost. While there are many variants of classic franchising, three are the most commonly used. These are: regional franchising; sub-franchising; growing franchise. In each of these cases, the franchisee receives all the benefits that are usually associated with franchising: the use of the franchisor's trademark and logo, its business systems, initial training, site selection, support, etc. Their main differences from each other are in the following characteristics:

1) the duration of the relationship between the franchisor and the franchisee,
2) to whom the franchisee can apply for support,
3) to whom he pays the prescribed contributions. "Dovgan V.V. Franchising: a way to expand business. (Organization, technology, methods, aspects).

Regional franchising- a form of organizing a franchise business, in which the franchisee receives the right to develop a certain area (create a franchise system) and control it in accordance with the agreed number of enterprises and the schedule for their opening. The enterprises to be opened do not have an independent legal status and are branches or affiliates of a franchisee;

"When choosing a regional franchise, the franchisor decides to cover some geographic area, which may be a metropolitan area, state or country. Realizing that he may not have the means or team to develop as quickly as he would like, he relies to support the main franchisee.In turn, the main franchisee has the right not only to recruit new franchisees in his geographical area, but also to provide their initial training and other services, which is usually done by the franchisor.The main franchisee is however included in the division of payments and often contributions to the advertising fund. He enjoys all the benefits that franchising usually gives, for this he also pays license fees, as well as fees for advertising directly to the franchisor. The contract between the franchisor and the main franchisee establishes what is expected from each party and what specific period the franchisee will perform this specific role.In response to the initial payment to the franchisor of contributions for activities in the exclusive territory of the market, the main franchisee in the future receives royalties from the franchisor, the amount of which depends on the share in the total sales volume of those new franchisees whom he involved in this franchise system. Unlike other methods, this method is beneficial for all parties, since the main franchisee is an elected person, and he must receive support throughout the entire period of cooperation, and this is also beneficial for the franchisor. "Dovgan V.V. Franchising: the path to business expansion. (Organization, technology, methods, aspects).

Sub-franchising- a form of organizing a franchise business, in which the franchisor transfers to another party - the main franchisee - the rights (sometimes exclusive) within a strictly established territory to sell franchises to third parties - sub-franchisees. The agreement may provide that some sub-franchisees have the right to operate more than one trading unit. In such a case, the sub-franchise agreement is referred to as a "multi-element franchise".

"In sub-franchising, the sub-franchisor also masters some certain territory and provides initial training, room selection, etc. The only difference is that the franchisee works directly with the sub-franchisor on a long-term basis and has very limited contact with the franchisor. It pays royalties and advertising fees to the sub-franchisor, who in turn pays part of that money to the franchisor. The sub-franchisor thus becomes the franchisor in its territory and the franchisee is dependent on its long-term support. The fact that a sub-franchisor may have unlimited funds, management and marketing abilities will reflect on the franchisee. Therefore, the potential franchisee must choose the sub-franchising relationship very carefully, as it depends on the business and life acumen of both the franchisor and the sub-franchisor.

In a territory development agreement, the franchisor transfers exclusive rights to develop a geographic area to a group of franchisors. Investors, in turn, either develop their own franchisors, which they own in this territory, or select franchisees. In the latter case, the position of the investor as the owner is limited. In response to the right to develop an exclusive territory, the person who owns this right pays a fee to the franchisor and is obliged to open a certain number of outlets in a specified period of time. Open franchisees pay royalties and advertising fees directly to the franchisor. The exclusive rights holder has no share in these fees, his share is only in the profitability of the individual franchises he has opened. "

Corporate franchising- a modern form of organizing a franchise business, in which the franchisee operates not a separate enterprise, but by a network of franchise enterprises using hired managers.

conversion franchising- a method of expanding the franchise network, in which an enterprise operating independently passes to work under a franchise agreement and joins the system of franchise enterprises operating under the control of one franchisee.

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One of the important components successful business is a clear understanding by the entrepreneur of the essence of franchising and its varieties.

Franchising- a type of market relations in which the franchisor (one party to the agreement) transfers the franchisee (the second party) for a certain fee the right to conduct any type of business using the developed technology.

According to the type of relationship between the parties to the agreement (the franchisor and the franchisee), there are several main types.

1 . Commodity franchising. This type of relationship is also called franchising goods. Mainly used in trade. By concluding such an agreement, the franchisee receives the right to sell the goods produced under the brand name of the franchisor.

As a rule, the franchisee has the right to after-sales and warranty service of the goods. The franchise agreement strictly regulates the sales technology, the range of services and goods, and clear rules for using the manufacturer's trademark.

If the franchisee purchases from the manufacturer trade software or real estate, the franchisor provides him with financial support, supplies advertising technologies, and trains staff. Examples of commodity franchising are the sale of cars, fuel, household appliances.

2. Franchising production (industrial). A company that has a patented technology for the manufacture of goods transfers to the franchisee the right to manufacture and sell products under its brand name.

The company transfers to the second party, in addition to the patent for production, raw materials and exclusive ingredients that only it produces using secret technologies.

In addition, the contract contains clear requirements for production process, the volume of products, its quality, sales plans. The qualifications of the staff and full reporting are also negotiated.

A large company supplies equipment on preferential terms, provides assistance in training employees, organizing production, sales and creating product advertising.

Production franchising is widespread in the production of non-alcoholic soft drinks. A prime example is Coca-Cola.

3. Service franchising . The franchisee is granted the right to engage in a certain type of service under the trademark of the franchisor, which provides the partner with equipment, advertising and marketing technology.

In addition to support, the franchisor necessarily monitors the work of the "junior" company. An example of service franchising is a network of dry cleaners.

4. Business format franchising (business). In this case, the franchisor transfers to the partner not only sales rights, but also a license to organize this type of business.

The documents clearly define the business concept, provide detailed instructions on employee training, requirements for the design of the interior of the company, for the uniform of the staff. Advertising policy, reporting, relationships with suppliers of goods are regulated.

Thus, the franchisee company operates under the sign of the franchisor and necessarily adheres to the same business concept.

A large company strictly monitors the fulfillment of the conditions. This type of franchising is used, for example, by a chain of fast food establishments (for example, McDonald's).

Business franchising is gaining momentum every year and today, according to experts, is one of the most promising, crisis-resistant varieties of doing business.

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Hello! From this article you will learn:

What is a franchise in simple words;
How to open a franchise business;
Common types of franchises and how they work;
Pros and cons of franchising.

And much more related to franchising in Russia.

What is a franchise

Aspiring entrepreneurs face difficulties and problems that can lead to the collapse of an idea. good option becomes a franchise cooperation with successful company. This type of business is most in demand in developed countries, where it accounts for 30% of all operating establishments in the service and trade sectors.

The term means a special kind of business relationship between an entrepreneur and a company that has successfully taken place and has a brand.

In simple words "franchise" is a long-term lease of a business project on the terms of the trademark owner.

A special agreement provides for a whole range of services that greatly facilitates the start and allows you to use:

The name of the brand and attributes;
General working style;
Branded recipes or formulations;
Technologies of work and service.

This system of doing business is rapidly developing in the domestic market of goods and services. If it takes more than one year to independently create a project and bring it to a stable result, franchise work can give a good profit in six months.

The difference between franchising and franchising

These two terms are actively used in the designation of such transactions.

An entrepreneur should understand the difference and correctly operate with them:

Franchise denotes what is bought on a long-term lease (rights, prescriptions, equipment, etc.);
Franchising– the process of acquiring a long-term lease.

The latter is a way of doing business, which involves the purchase of a brand or production technology, staff training and the creation of a branch of a well-known brand. The term "franchising package" is often used. It combines documentation, manuals and materials belonging to the company.

How does a franchise work

Before understanding what a franchise is and how it works, you need to get acquainted with the basic terms and names.

There are two parties involved in organizing a business project:

Brand owner directly franchisor): sells a license, allowing you to work on your behalf under certain conditions;
Buyer ( franchisee): uses the acquired potential in the working process, transferring a part of the income determined by the agreement to the franchisor.

The franchise is completely ready plan and a business project management model, so the future entrepreneur does not need to spend time on solving organizational issues. Despite the cost, this option is beneficial for both parties. The new owner receives support and support, and begins to work without a huge initial capital, leaving yourself about 90% of the profit in the first month.

The brand receives a stable profit in the form of:

Lump sum, which is paid once after the signing of the contract. This amount gives the right to open a business project under the sign of a famous brand. It includes all costs for launching, designing and equipping a new enterprise (rent, development of a marketing and advertising strategy, staff training);
Royalty as a percentage of total turnover. In most cases, payment is made monthly to the franchisor's account and amounts to approximately 5-10% of the profit received. This is a kind of replacement for rent. In the commodity form of franchising, a royalty is a regular purchase of goods for a certain amount.

Royalties are the main source of income for many franchisors involved in trading activities or providing services.

The contract specifies one of the payment options:

Percentage of product sales;
A fixed amount that is paid annually (or quarterly);
The trade margin on branded goods, the sale of which is carried out by the franchisee.

A low percentage of mandatory payments at the level of 10% is an acceptable amount even for a novice entrepreneur. The brand's popularity helps it attract a large number of customers, recoup investments with minimal risk. Such a transaction is beneficial for a franchisor company not only by the return of stable profits without preliminary investments. It allows you to expand and advance in the market, to receive high incomes.

There are two main types of systems that are found on the market:

Merchandise Franchising: chains of stores of various types are being created for the sale of industrial products or food products. The franchisor himself is often the supplier of these goods;
Service Franchising: a network of training centers is developing, which train specialists for new branches, provide equipment and control.

Such types of work were chosen by the well-known companies McDonald's, Lukoil and Zara, the Perekrestok retail chain and mobile operator Beeline. Economists identify at least 70 interesting areas where the franchise is relevant and in demand.

The first places in such a list are occupied by:

Production of popular foods and drinks (snacks, chips or beer);
Supermarkets of various types (food, Construction Materials or gardening)
Gyms and health centers, beauty or massage salons;
Public catering (from fast food eateries to reputable restaurants);
Pawnshops and organizations providing quick microloans;
Sale of sports nutrition, oxygen cocktails;
Construction and repair services;
Departments of household appliances or decor stores;
Representation of well-known online stores.

The most promising areas are those related to public services and the provision of various services. They show high sales turnover, so the franchisor will quickly and consistently receive decent royalties.

Types of franchises

There are several types of franchises that differ in terms of cooperation and interest rates for using the brand:

Free- the most popular option that gives great opportunities to the entrepreneur. It allows you to make innovations and features in project management. This type is characterized by affordable monthly interest, the ability to use a trademark, interesting free master classes and other privileges. It is more like a dealership than others.
classical- provides for a standard approach in the form of a lump-sum contribution, compliance with all rules for the provision of services on behalf of the trademark, periodic activity reports to the main office. Clear conditions and strict limits distinguish foreign franchise companies.
Business for rent- a franchise entrepreneur receives a business project for management for a certain period. During this period, all income is distributed in the agreed proportion.
Golden- This is an option for experienced businessmen, which allows you to purchase from the franchisor the right to be the sole representative of his brand in the region. With a high cost of a lump-sum contribution, the entrepreneur receives broad rights and opportunities for project management. They even extend to the possibility of selling a franchise to other businessmen.
Silver- the most convenient form of franchise. The company is completely turnkey, independently looking for a place to rent, staff, decides organizational matters. It is transferred to the franchisee on a monthly interest basis, and the company is removed from management.
Corporate- the contract provides that almost all actions of an entrepreneur who has acquired a franchise are regulated and controlled by a well-known company. He plays more of a managerial role.
Import-substituting view- involves the production of high-quality products, similar to branded ones, but under its own name. This makes it possible to preserve technology and originality while working with ready recipes or instructions.

The latter has recently appeared on the domestic market, but is actively promoted by foreign companies producing food, cosmetics and detergents.

Franchise cost

When choosing a franchise for many entrepreneurs, the main issue is cost. It directly depends on the fame and popularity of the trademark, the position of the company in the market of goods and services.

An important component is the list of services and equipment that will be available after making the first installment. The average size deductible ranges widely from $1,000 to $100,000.

The most loyal conditions for a lump sum are offered by supermarket chains, chains of small eateries or cafeterias. Given the economic hardship for SMEs, many have canceled the initial payment. This attracts potential franchisees on favorable terms.

The second important issue is regular royalty payments. Almost always, they are prescribed in the contract not in a fixed amount, but as a percentage of turnover or profit. Most fast food chains, grocery supermarkets are limited to 2-5%. Narrowly focused companies or broadly famous brands may require 10-12% for work under their own name.

Some entrepreneurs do not have the financial means to purchase a franchise package, but have organizational skills and a desire to develop their own business.

In this case, the exit will be a franchise without investments, which can be obtained in one of the difficult ways:

Find a network with a missing or formal lump-sum fee;
Submit an original business plan and try to get small start-up investment at the franchisor;
Look for interested third-party investors on favorable terms.

A common option is when a network provides franchises on the most convenient terms to its current employees. These are talented managers or heads of departments who have the opportunity and desire to become a co-owner of a new branch or outlet.

The benefits of franchising

The number of enterprises that are actively working under a foreign brand has exceeded 10,000 projects.

Each of them appreciated the obvious benefits of cooperation:

Low risk. Entrepreneurs with little experience in financial affairs receive support and advice from the first minutes of work. Many franchisors accompany partners throughout the entire term of the contract, teach new techniques and technologies.
recognizable brand name. It is easier for a novice businessman to settle in the market "under the wing" of a brand with a good recommendation. The product or service is already known to customers, is in demand and will quickly bring the first income.
Saving time for project promotion. Most businesses take at least 2 years to build their own brand and get their money back. A franchise project can reach self-sufficiency in 5-6 months.
Professional Support. Large companies seriously approach the preparation of future franchisees. For them, training programs and courses are held on the topic of production, doing business and customer service. Personnel who will work on the basis of franchising technology are trained free of charge. Most brands are ready to provide legal assistance at any stage and provide access to useful information.
Minimum advertising spend. Companies with a recognizable trademark constantly run large advertising campaigns. Therefore, franchisees can limit themselves to low-cost advertising in local media and social networks at the level of your region.

The main advantage for franchise company This is a guaranteed sale of a certain volume of products. Brand owners can plan the pace of production and work, future costs and develop new products.

Franchise Disadvantages

Every trade has its downsides. There are also a number of shortcomings in the work on the franchising system, which the entrepreneur must remember before the final signing of the contract.

List of disadvantages:

Strict framework. All actions and decisions of the franchisee are regulated by the cooperation agreement with the brand. He has no right to violate the technology of production or provision of services. Restrictions may relate to the design and location of the premises, its area and the number of staff.
Inability to choose equipment or raw materials. In addition to monthly interest payments, the contract specifies the conditions and volumes of purchases of materials only from the franchisor. This limits in technical development and improvement.
High price for profitable franchises . Many projects have a large lump-sum contribution and are beyond the means of talented entrepreneurs. The cost can exceed $50,000 with small regular payments. This is typical for foreign companies that invest heavily in advertising and development of their own technologies.
Control by the franchisor. It is not always comfortable and easy for aspiring entrepreneurs to work under the close supervision of a brand. This includes regular reports in various forms. All options and terms are specified in the contract, so you should weigh the possibilities of such close cooperation. It is better to choose a more obscure project that will give freedom of action and bring pleasure from work.
Limitations in self-expression. Strict technology compliance requirements may include certain promotions, pace of development and expansion. Big choice marketing tools happens to buyers of a free type of franchise. In this case, the company practically does not interfere with the principles of franchisee management.

Among other disadvantages that accompany the work, experienced managers highlight the fast pace of work. The company provides a clear regulated plan for the next 2-3 years, which does not allow you to relax or retreat. All products or services must strictly comply with the franchisor's regulations, and any violation leads to the revocation of the license and termination of cooperation.

How to buy a franchise - the main stages

After assessing all the risks and prospects, you can start looking for the best offer. Running a franchise business comes with certain responsibilities and restrictions. Therefore, a quick return on investment and the profitability of the project largely depend on the capabilities of the franchisor.

Important! You can find a franchise in our. It contains the most reliable franchisor companies that have long established themselves in the market!

The choice of a future partner should be considered carefully at each stage of the transaction:

Market analysis and selection of a promising direction activities. Each area has certain problems and shortcomings. Profitability depends on many factors, including the location of the office or outlet, the number and level of training of staff.
Search for the optimal franchise in catalogs and websites, careful study of each proposal.
Introduction to the franchise company, working conditions and requirements for applicants. Reputable brands are willing to make contact and are ready to provide maximum information.
Communication with established franchisees who can provide guidance, advice, or highlight controversial business issues.
Getting advice from a franchising specialist. It can be found in a consulting or legal form. It will help to understand the contract, show hidden opportunities and "pitfalls" of the business project. The lawyer will study the proposed documents, check the correctness of registration of trademarks and licenses.
Assessment of own financial capabilities. In addition to the down payment, investments in the design and rental of premises, hiring staff, paperwork and seals may be required.

The final stage will be the conclusion of a franchise agreement with the selected partner, the signing of contracts and fruitful cooperation. Experienced franchisees strongly recommend that novice entrepreneurs consult with lawyers at all stages and analyze each step.

Requirements for a potential franchisee

The financial crisis has forced companies to reconsider their selection of candidates for cooperation. The main criterion is the financial capabilities of the franchisee. In addition to the lump-sum contribution, decent expenses will require rent and equipment of the premises, the purchase of the first batches of goods or raw materials.

Franchisors indicate the minimum starting amount that a potential candidate should have:

McDonald's network - more than 1 million rubles;
Clothing brand Zara - 1.2 million rubles;
LLC "Burger King" - more than 2 million rubles;
Coffee Woods coffee houses - from 200 thousand rubles.

When interviewing representatives of a franchise company, the following points are of interest:

Experience in a managerial position, ability to lead a team and make decisions;
Knowledge or skills in the chosen field of activity;
Availability of space for production capacity, restaurant or workshop;
Psychological stability and the ability to work with limitations, under control.

The main problems for partners arise with a different approach to doing business and solving difficult situations. Therefore, foreign companies often conduct special testing and surveys. It helps to assess the potential and stress resistance, the ability to maintain the corporate spirit. Domestic companies prioritize work experience and financial stability.

Features and content of the franchise agreement

After choosing what to open under a franchise, the conclusion of an agreement is an important component that determines the norms and rules of cooperation between the parties. Therefore, do not neglect the advice of a lawyer, the study of each item.

A franchising agreement (commercial concession or license) must be concluded in writing. The validity period in this type of relationship is not a mandatory part of the document and can reach 50 years.

Franchise or commercial concession agreement signed between the franchisor and the franchisee. The first is indicated as the right holder transferring certain rights for use. The second party is a natural or legal person.

The subject of a commercial concession agreement may be: a company's trademark, production technologies or know-how. Be sure to specify the volume and terms of submission. The document details the method and amount of payment of the lump-sum contribution, as well as royalties. By agreement of the parties, these points can be indicated in percentages or in specific numerical terms.

Sometimes a subconcession clause is specified in the contract. It means that, under certain conditions, the franchisee can transfer the rights to a third party for the implementation entrepreneurial activity. The parties may indicate other situations that can lead to a change in conditions: the unprofitability of an open business project, changes in the composition of management and other circumstances.

Rights and obligations of the parties

The franchise agreement is primarily aimed at securing the rights of the parties and the designation of their obligations.

The franchisor is required by law to:

Transfer to the partner in full the documents and equipment that is necessary for doing business;
Guarantee and ensure the uninterrupted supply of goods or components of proper quality;
Train staff in the technology of the work process;
Provide franchisees with full comprehensive advice on all issues related to working moments.

The brand reserves the right to control the activities of the branch, the quality of its products or the provision of mass services to them.

The agreement provides for the following rights and obligations of the franchisee:

The use of the trademark and all technological capacities only in accordance with the rules of the document;
Provide high quality products manufactured under this mark;
Comply with all the rules for using branded equipment, do not change the technology and recipe;
Do not declassify technologies and professional know-how;
Participate in the financing of the advertising fund, support promotions on behalf of the brand.

The contract may contain other clauses and sections that regulate relations between the parties and make their work comfortable. They depend on the type of franchise, type of activity and other indirect factors. The document should not restrict the rights of the franchisee, especially in the area of pricing and project management. It is subject to mandatory state registration.

The conclusion of a franchise agreement gives the entrepreneur the opportunity to open a profitable project under the authority of a serious brand. In order for cooperation to become profitable and full, it is necessary to register all the exciting moments and nuances, discuss them with an experienced lawyer.

Experts consider the problem of keeping technologies and recipes secret, as well as the negative in the case of franchisees, among the disadvantages of the agreement. A serious problem is the success of a branch that leaves the brand network and becomes a competitor in the industry.

Contents of the franchise package

After the conclusion of the contract, the company provides the new partner with a franchise package, the contents of which are covered by a lump-sum fee:

The possibility of using a well-known trademark in the production process;
Developed instructions and recommendations for corporate identity, design and packaging;
Developments by organizational structure: training and motivation of personnel, creation of conditions for work and development, job descriptions;
Information about the product and raw materials, including certificates, norms and technologies;
A complete list of trading partners and wholesale purchase centers with coordinates;
Instructions for launching and maintaining a business project;
Requirements and recommendations on pricing policy;
Transport schemes.

Franchising packages of each brand may vary, so it is better to specify the exact list of services and documents individually. For small cafes or shops, dishes or packaging materials with a logo, uniforms and room design can be added. In practice, an entrepreneur must receive all the conditions for doing business.

Famous companies include in the package ongoing legal and marketing support, advisory services and retraining of personnel at various stages. They provide support for registration in government bodies, health checks and reporting. This helps the branch to maintain momentum and develop actively.

Popular examples of franchising

Several hundred companies are actively working on the domestic market, which are constantly expanding their network through franchising.

Based on many parameters and tempo economic growth, you can make a certain rating of brands offering a ready-made franchise business:

"Fix Price" - a chain of stores where goods are available at one price, already has 2050 outlets;
Pyaterochka is a retail chain with 6,200 supermarkets throughout the country;
Operator "Tele2" - a provider of communications and the Internet with 3,100 franchisees at the end of last year;
Network "KFC" - at high costs 30,000 outlets are already operating to launch a new cafe;
"33 Penguins" - a company that opens an ice cream parlor and is aimed at visitors of different ages (1312 establishments);
"Invitro" - independent laboratories offering a wide range of analyzes at an affordable price (more than 700 departments);
"Sportmaster" - favorite stores of fans of an active lifestyle offer excellent conditions for cooperation;
"Orange Elephant" - the most profitable children's franchise of 2015 quickly pays off and opened 360 branches in 9 years;
Askona is a furniture factory whose products can be purchased at 600 points.

Among fast food and fast food chains, the proposal to open a franchise business can be discussed with representatives of:

McDonald's - the most famous franchise requires a serious approach and large initial investments from applicants (more than 36 thousand establishments in the world);
"SUBWAY" - a fast food chain with the largest franchise and 43 thousand cafes in many countries;
Russian "Stardogs" - with available conditions for small business.

All these franchises are in our franchise directory!

Entrepreneurs who are interested in a franchise without investment are offered cooperation by small companies. They provide comprehensive services or retail goods: souvenir brand "Present Day", toy store "Your Bear" or transport company"Your Ticket" Their conditions and the cost of royalties are within the power of entrepreneurs who do not want to take loans or loans.

How to choose a franchise

Before purchasing a franchise, it is necessary to carefully study the demand in the region, assess the purchasing interest and solvency. It will be right to consider all the indicators in the future, so as not to crash after a few years of work.

An important issue is the reliability and popularity of the franchise partner. Good companies offer not only trademark and equipment, but also constant training, advice and loyal financial conditions. The most comfortable will be cooperation with minimal intervention and control of work from the network.

Is it possible to work with several franchises at the same time

Until the last wave of the economic crisis, most reputable brands did not give entrepreneurs the opportunity to manage several business projects at once. It was believed that the franchisee will not be able to control and develop them successfully, will lead to bankruptcy. A significant slowdown in economic growth has led to the development of multifunctional franchising. Many companies began to cooperate with successful entrepreneurs who had experience in this system in other areas.

Experts recommend that one businessman work with no more than two franchisors at the same time. Proceed to the next case after establishing stable operation of the first branch. The option is more suitable for active and creative people who have free time and a team of like-minded people.

Can I get a loan for a franchise?

Such projects are approved by banks due to the presence of a well-defined business plan and economic strategy. Compared to self-employed businesses, franchisees close only 15% of the time. Therefore, banks are increasingly developing special programs adapted for this type of business.

Is it worth it to cooperate with a brand that has few representatives

The domestic franchising market is in search of new directions. Some companies do not have permanent offices in a number of regions. Therefore, buying a franchise from such a brand will bring a bonus in the form of a small number of competitors and sub-franchising in the future. New little-known brands can offer great conditions and minimal royalties to grow and gain momentum faster.