Types of franchising and its role. Franchising: what is it in simple words. Advantages and disadvantages of franchising ……………………………………….… 22

The franchise business model is gaining momentum around the world and, in particular, in Russia. Various options for the design and development of this entrepreneurial activity forced us to take a serious approach to the issue of the structure of the business. In this regard, the classification characteristics of franchising appeared. This approach makes it possible not only to determine the type of trade relations, but also to draw up an agreement in a legally competent manner.

At the moment, specialists rely on the publishing house under the leadership of V. Kolesnikov. The researcher, after analyzing the market, wrote a book, where 6 sections of the classification are highlighted.

They are based on the following criteria:

Franchise buyer activity.
The number of franchises issued.
Franchising scheme development strategy.
Functional structure.
Role and function of the franchisor.
Franchise cost.

Franchising options by type of business of the franchise buyer

In the case of a license purchase, a novice entrepreneur can act in different ways. Considering what kind of work the franchise buyer plans to organize, the following types of franchising are distinguished:

Manufacturing or industrial.

A franchise for the sale of finished products is issued to a franchisee for trading in a limited area. In this situation, the owner of a large brand is engaged in the production of goods of one category. The buyer gets the right to sell it in their stores under the franchisor's brand. (Read about in our article)

Attention! Manufactured products that do not have a brand do not apply to this type of franchising.

For a certain type of activity.

A production franchise is a business scheme when the franchisor has a patented technology for manufacturing the main component of the product, and he is ready to provide an exclusive right to the buyer in order to produce and sell the goods within the agreed territory.

At the same time, a large enterprise can supply raw materials and supplies. The production technology is also provided, which can be an individual discovery of the owner.

Franchising can be very different. When looking for a field in which to open a business according to such a scheme, you need to carefully choose, because the types of franchises are varied and numerous. There is a classification according to the nature of the relationship between the franchisor and the franchisee, by types of activity. You need to understand the specifics of each option - this will help you choose the best option for running your business.

Separation by the nature of the relationship

This classification is also called the division according to the degree of freedom of doing business.

There are such options:

Classical.
Free.
Full construction.
For rent.
Master franchise.
Corporate.
Import substitution
Bank

Classical

It is also standard and is the most popular. The main features are the payment for the purchase of the business model, the regular payment of royalties. The franchisor controls the process of activity rather tightly. In addition, the franchisee obtains the rights to the trademark, he is obliged to periodically submit a report. This type is convenient for a novice businessman and consumer. The latter is guaranteed to receive the expected quality.

Important! The franchisor strictly controls compliance with the standards. In the case of a retail outlet, a regular check of the condition and appearance of the TT, the display of goods, the appearance of personnel, etc.

Free

In this case, everything is simpler. The entrepreneur gets the opportunity to make decisions on his own. Payments - royalties and push-ups - are minimal. The franchisor intervenes little in business and does not maintain strict control. That is why this model has become popular in the CIS.

With all this, the franchisee has the right:

Use the trademark.
Receive free consultations, training.
Have discounts when purchasing goods / raw materials.

In essence, this scheme is like a dealership, but with certain advantages.

Full construction

This type is also called a silver franchise. It is clear why, because the franchisee gets a ready-made business at its disposal for a certain amount. The franchisor company creates a branch of the organization under its own trademark and sells it. At the same time, he retains the right to receive part of the profit. In the future, he does not interfere with the functioning.

For rent

As in the previous case, all organizational issues are assumed by the franchisor, also creating a branch of the company in accordance with all corporate requirements and rules. But the transfer of property rights to the entrepreneur does not take place - he manages the point and conducts business. For this he receives a percentage of the profit. This type is characterized by the limitation of the actions of the franchisee, he, in fact, is not an individual entrepreneur, but simply a manager.

Master franchise

This franchising option is also called gold. It provides for the purchase of rights to develop a trademark within one region under the control of the franchisor. In this case, the entrepreneur receives the following rights:

Work alone in the region.
Open new branches on their own.
Help start a sub-franchisee business - that is, transfer the franchise further.

Corporate

In this case, the franchisee's freedom of action and decision-making is very limited. The franchisor owns the assets and controls the business. A special note in such agreements is the prohibition on termination and creation of a business under your own trademark in the same place.

Import substitution

It implies the manufacture of imported goods, but under a domestic trademark. This idea is not new, in the 90s it was successfully used, albeit illegally. They took the business idea, changed the name and worked. And this scheme was and remains successful, but now in the legal field.

Bank

Implies working on a franchise in the banking sector. This type of business is popular and in demand. But not all banks sell franchises by region, at least they are reluctant to do so. Therefore, there is a queue for the right to such a franchise.

Classification by type of activity

There are these types of franchises by type of activity:

Trading... The franchisor transfers to the entrepreneur the brand, the sales methodology, and the actual product for sale. Support and control of TT registration is carried out in accordance with the corporate style. The staff is provided with uniforms, the store - with equipment. With this approach, it is possible to make a profit already 3 months after the opening of the store.
Service... This type is more difficult, because it is necessary not only to properly arrange the point of service, but also to comply with the standards. At the same time, the franchisor provides the necessary training for the entrepreneur, so that he can keep under control the observance of the level of service. This type of franchise is less developed, because the franchisor needs to create a scheme, rules, procedures by which the entrepreneur will work to achieve the expected result.
Production... In this case, there is a sale of production technology, the right to use the brand and sell the manufactured goods. At the same time, it is important to observe the corporate style and marketing strategy. This type has not become widespread, since it is cheaper to buy a license for the production of goods.
Mixed... This option is convenient and popular. It implies a combination of the above types. That is, the franchisee is engaged in the manufacture of goods, sells it under the franchisor scheme, and in parallel with this, it also provides services under the franchise. The simplest example is the manufacture of cosmetics, their sale in a company salon and the provision of cosmetic services using the manufactured products.

Know-how of the franchisor

In this classification, there are 2 options - product distribution franchising and business format. In the first case, the entrepreneur acquires the right to sell goods or provide services under the franchisor's trademark. This option is more convenient, first of all, for the licensee's company, because it turns out to expand the market and make the trademark recognizable and in demand.

As for the business format, this is the next stage in the development of the franchisor's company. After all, now entrepreneurs who want to buy a business are provided not only with the right to conduct activities under the trademark, but also a whole business concept up to the design of sales areas, personnel uniforms, sales standards, and services. That is, the know-how is transferred to the franchisee in the format of a ready-made business concept.

Conclusion

Franchising of one type or another is very different. You can buy the right to work using a trademark and pay less. Or you can turnkey ready-made system, which will provide almost 100% income. In this case, you will have to endure careful control by the franchisor.

Franchising - as a rule, is regulated by Chapter 54 of the Civil Code of the Russian Federation. Under a commercial concession agreement, one party (rightholder) undertakes to provide the other party (user) for a fee for a period or without specifying the right to use in the user's business a set of exclusive rights belonging to the rightholder, including the right to a company name and (or) commercial designation copyright holder, to protected commercial information, as well as to other objects of exclusive rights provided for by the contract - a trademark, service mark, etc.

In Russia, franchising does not always imply the use of an agreement, an example of which is presented in Appendix 1 in Figure 22, a commercial concession at the heart of its legal framework. Within the framework of franchising, the following agreements can be concluded: commercial concession agreement, supply agreement, agency agreement, licensing, commodity credit, safekeeping, sale and purchase, and a number of others.

Franchise - the right to carry out certain economic activities using the principle of franchising, enshrined in an agreement, agreement, as well as activities (production, provision of services, etc.) carried out using the principle of franchising.

Franchiser - an individual or legal entity that offers for sale an agreement on the terms of a franchise and ensures, on its part, the fulfillment of the terms of such an agreement.

Franchisee - a natural or legal person acting in accordance with the acquired franchise.

A franchise agreement is an agreement according to which one party (copyright holder) transfers to the other party (user) for an appropriate fee and for a definite or indefinite period of time the right to use the company name, commercial information, trademark, service mark, etc. Parties to a commercial concession agreement can be legal entities and individuals registered as individual entrepreneurs.

Lump-sum payment - a one-time remuneration of the franchisor in the form of a certain amount firmly fixed in the contract (agreement), which is established based on estimates of the possible economic effect and expected profits of the franchisee based on the use of the franchise, can also be calculated as payment of the franchisor's costs associated with the sale of the franchise;

Royalties - remuneration in the form of periodic payments of fixed rates determined by the franchisor based on his own assessment of the value of the right to use the trademark of a unified franchise network, which are paid to the franchisee on a monthly basis.

There are three main types of franchising, all of which are shown in Figure 5

Figure 5 - Types of franchising

Commodity franchising is the sale of goods produced by a franchisor under a registered trademark. Franchisees, as a rule, provide their after-sales service ("Econika Shoes", "Red Cube"). This type of franchising is sometimes referred to as “product (trade name) franchising”. This is a trade franchise for the sale of finished goods. In commodity franchising, the franchisor is usually the manufacturer who sells the finished product or semi-finished product to the franchisee dealer. The latter provides pre-sales and after-sales services to buyers of the franchisor's products and refuses to sell competitors' products. This rule is the essential content of the relationship between partners - the franchisor and the franchisee dealer.

This type of activity involves the acquisition from a leading company of the right to sell goods with its trademark. In this case, the franchisee buys goods from the franchisor and then resells them on behalf of the franchisor. In some cases, the leading company has to do with paying for warranty services and reimbursing co-advertising costs. As a rule, commodity franchising is characterized by a narrow specialization of the franchisee in the sale of one type of goods and services.

Manufacturing franchising is a franchising for the production of goods. In this case, the firm that owns the technology for making a certain product sells the raw materials to local or regional factories (for example, a bottling plant for soft drinks). A small company here not only acts under the brand name of a franchisor and sells its products and services, but is also included in the full cycle of economic activities of a large corporation, fulfilling the requirements of the technological process, quality, personnel 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.

Business franchising or business format franchising. In this method, the franchisor sells a license to individuals or other companies for the right to open stores, kiosks or entire groups of stores to sell a set of products and services to buyers under the name of the franchisor. Thus, this is franchising by type of activity, i.e. inclusion of a small enterprise in the full production and economic cycle of a large corporation. Perhaps the most popular type of franchising, in which a leading firm sells a license to private firms or companies for the right to open their own company selling products and services under the name of a franchisor (for example, rental and consumer services, business and professional services to businesses and the public, shops or chains eateries, hotels). A large corporation imposes equal requirements to the technological process, quality, and also provides personnel training, selection of the site for the construction of an enterprise, and other services (methods of ensuring sales, maintaining operational reporting, etc.). Business franchising requires the franchisee to pay a recurring fee and also to make contributions to an advertising fund managed by the franchisor. The franchisor can lease fixed assets to the franchisee, offer him financing; he is also entitled to act as a supplier for his franchisees.

While there are many variations of classic franchising (Figure 5), three are the most commonly used. These are: regional franchising; sub-franchising; developing franchising (Figures 6, 7, 8, 9).

Figure 6 - Classic Franchising

Figure 7 - Regional franchising

Figure 8 - Sub-franchising

Figure 9 - Evolving Franchising

Franchising, depending on the directions, is of four types:

1) product franchising;
2) industrial franchising;
3) service franchising;
4) business format franchising.

Franchising goods is the sale of goods produced by the franchisor and in any way marked with its trademark. Franchisees, as a rule, provide after-sales service for them.

The rightholder (franchisor) in this type of franchising is the manufacturer. The main transferable right is the right to use the franchisor's trademark. Option III assumes continuous communication between the manufacturer and the wholesale and retail trade, that is, the wholesale company is given the right to assign the rights of the copyright holder on certain conditions.

Product franchising is not widespread. In most cases, this kind of relationship is beneficial to the franchisor, since they provide him with the promotion of the trademark, expansion of the sales system and continuous communication with consumers through the sales system. At the same time, the franchisee is part of the sales system controlled by the franchisor.

Since in the overwhelming majority of cases the assortment policy is important for trade enterprises, trade in selected goods is not always effective.

In cases where a trading company specializes in a particular group of goods, franchising the goods has the right to exist, since the seller organizes the sale of goods of a particular company and has the opportunity to bring his image in line with the manufacturer's image and be recognizable in the market for similar goods. An example of effective work in this direction is General Motors, which is still the leader in the automotive industry.

An example can also be cited from Russian practice. Unfortunately, it is negative. By 1993, the largest car manufacturer AvtoVAZ had completely lost control of the market due to the lack of a unified marketing and pricing policy, and arbitrary behavior of intermediaries and dealers. The range of prices for dealers was about 2 thousand dollars, in a number of cases dealers were selling cars cheaper than the factory price, which naturally led to great difficulties with the sale of products.

Product franchising can be applied in the marketing of petroleum products, especially when separating gas stations from larger sales structures. Although, due to the change in consumer preferences for the system of services provided at gas stations, the use of pure franchising of goods in this industry is limited. The most effective form of relationship here will be business-format franchising, which will be discussed below. Refining franchising is most common in Australia.

Product franchising can also be used in the sale of cosmetics and branded clothing. An example of commodity franchising in Russia is Le Monti. However, in Russia, in the context of the widespread use of various credit and bill schemes for payment for products, franchising for goods is unlikely to receive widespread practical application.

Unfortunately, the lack of literature on franchising, different interpretations of the very system of relations cause a lack of understanding of the meaning and attractiveness of franchising and, as a consequence, the limited use of it in business practice.

Industrial franchising is the most efficient organization of the production of a certain type of product. The company, which possesses the secret of production of raw materials and a patented technology for manufacturing a finished product, provides the end manufacturer with raw materials and transfers the rights to use this technology.

In practice, most often the owner of the rights is an enterprise that is not a producer of raw materials or finished products, and the relationship scheme is formed according to two other options.

The most prominent representative using the industrial franchising system is the Coca-Cola company. The centralized production of soft drinks is unprofitable due to the remoteness from consumers and high unjustified costs. Therefore, the commission provides end producers with special concentrates and grants the right to use the technology. In 1995 the company entered the Russian market by concluding franchise agreements. It does not independently build factories for the production of products; the subject of sale is a recipe for production and a well-established brand name.

Industrial franchising is based on common goals for the parties:

-division of labor and specialization of production;
- increasing the volume of production and expanding the production program;
- ensuring the efficiency of production;
- increasing the flexibility of production and distribution in accordance with the requirements of the market;
- mastering the production of new products depending on changes in the market.

Manufacturing franchising has much in common with, but is not limited to, a licensing agreement. Franchising is not just a contract, it is a system of long-term relationships, detailed by the main contract and a special Franchise Manual, which is also the property of the franchisor. The terms of the license agreement are only part of the relationship provided by the franchise system.

Service franchising is a cross between the above two types. Its scope is services. The essence lies in the fact that the franchisee is given the right to engage in a certain type of activity under the franchisor's trademark. The franchisor has a number of patented rights that are transferred to the franchisee on the basis of an agreement

The familiar McDonald's franchise system, along with the trademark and the technology of making sandwiches, has its own standards of interior and exterior design of premises, corporate identity in all elements of organizing food preparation and customer service.

Kodak is actively working in the Russian market. The largest representative of the franchise network - the Marriott company - is familiar to us from the Marriott Grand Hotel.

Service franchising has become widespread and is a promising technology for doing business. The main focus of service franchising is a high level of customer service. Thanks to the joint policy pursued by the franchisor and the franchisee, the consumer quickly becomes aware of the quantity and quality of services he can be guaranteed in a certain period of time at the enterprises of a certain brand. Awareness saves consumers time to find and satisfy their customers, and the expected quality of service has, among other things, a positive emotional impact, which increases the likelihood of repeated calls to the franchisee. The consumer identifies the copyright holder and the user of the trademark, which gives additional impetus to the development of the franchising system.

Franchising is applicable in almost all areas of the service sector. Foreign service companies are increasingly entering the Russian market offering to purchase a franchise. A franchise is the entire package of rights, technology, equipment, services, etc., offered by the franchisor for sale.

On the Russian market, service franchising is actively developing in the tourism business, in the field of real estate, employment and educational activities.

Business format franchising is the most complex. Along with all the above rights, the franchisor transfers to the franchisee the technology for organizing and running a business developed by him. The franchisee is fully identified with the franchisor and becomes part of the overall corporate system. In such a franchising, the franchisor can be an enterprise that extracts raw materials, a manufacturer, a wholesaler or a retailer, a service sector enterprise, or it can only be the owner of rights that are transferred to the franchisee under certain conditions. But at the same time, all enterprises operating in the system must work according to a unified methodology, in a unified style and observe intra-system interests. The business format franchising system makes it possible not only to expand the business on an intra-industry scale and adjacent industries, but also to include various business areas in the system. A high reputation of a company in one area of activity when using a business format franchising system in practice gives tremendous opportunities for expanding activities both for the company itself (in this case, it will naturally be a franchisor) and for enterprises that will use this reputation for organization and development. your business.

Let us illustrate what has been said with a conditional example. A gas station is being built on the busy highway. A modern consumer, while waiting for the end of the service, often needs to call, wash his hands, have lunch, buy something and, perhaps, have a rest. Based on this? it is necessary to form several independent enterprises. In order to avoid inconsistency of activity among potential clients, the corporate style and methodology of their activities should be identical.

The word “franchising” comes from the French “fran-chise”, which means “benefit, privilege, exemption from tax, contribution”. Subsequently, this word was fixed in the English-speaking states. In the Civil Code of the Russian Federation (Art. 1027), this term was called “commercial concession” and “commercial concession agreement” and the following definition is given to it: “Under a commercial concession agreement, one party (copyright holder) undertakes to provide the other party (user) for a fee for a period of or without specifying the term, the right to use in the user's business a set of exclusive rights belonging to the rightholder, including the right to the trade name and (or) commercial designation of the rightholder, to protected commercial information, as well as to other objects of exclusive rights provided for by the contract - a trademark, service mark, etc. ”.

In other words, in essence, franchising is a system of relationships, which consists in the paid transfer by one party (a company, as a rule, of a pronounced image and a high reputation in the market of goods and services) to the other party (a company or individual private entrepreneur) of its means of individualization. goods produced, works performed or services rendered (trademark or service mark, corporate identity), business technology and other commercial information, the use of which by the other party will contribute to the growth and reliable consolidation of goods and services in the market.

At the same time, the transferring party undertakes to assist in the establishment of the business, to provide technical and consulting assistance.

Franchising is characterized by the following main features and characteristics:

- franchising presupposes the presence of two parties to the agreement (agreement) - the franchisor and the franchisee;
- the franchisor is the owner of exclusive rights: trademark, corporate identity, patent, idea, copyright and similar rights. Using Russian terminology, the franchisor is the copyright holder;
- the franchisor, being the copyright holder, transfers his rights to the franchisee on certain conditions. The franchisee operates under the franchisor's trademark, using its reputation in the market for goods (services), and is identified with the franchisor by its corporate style;
- the franchisor acts in the singular; there can be several franchisees working under an agreement with the copyright holder, that is, it is a kind of network that works according to a unified methodology. The goal of franchising is to run your own business, the goal of the networks is to sell more goods (services) and attract as many participants as possible;
- for successful business conduct, the franchisor provides the franchisee with various forms of support and enjoys the right to regulate the franchisee's activities in order to preserve its reputation in the market without violating its legal and economic independence;
- the franchisee makes certain payments for the use of the franchisor's rights and the support provided.

Franchising dates back to the early 1800s, a so-called linked house system used by British brewers. In 1860, the Singer factory, specializing in the production of sewing machines, operated according to a scheme very close to franchising.

Developed in 1886, the Coca-Cola formula and its sale in 1900 led to a powerful impetus in the development of franchising; the system began to spread rapidly under the "Coca-Cola" brand, known to all until now. The greatest success in the development of this system was achieved in the 50s. the last century to the Mac Donald brothers. Currently, the McDonald's franchise system numbers about 20 thousand enterprises in different countries of the world.

In Russia, examples of franchising are McDonald's, Baskin Robbins, and Subway.

The stabilization and further revitalization of the Russian economy are directly related to the solution of the problems of small business development. The role of this sector of the economy has been seriously rethought in recent decades. Now it is seen as a necessary condition for the self-development and stability of its economic system. So, in the United States there are about 20 million small firms, in Japan - more than 6.5 million.According to the estimates of the Ministry of Economic Development and Trade of the Russian Federation, to activate the self-regulation mechanism, ensure sustainability and development, our country needs about 2.5-3, 5 million small private firms. And for such mechanisms to work confidently, this number should reach 9-12 million firms.

Russian small business is in a very difficult situation, since in our country its infrastructure is at the very beginning of its formation. One of the ways to accelerate its creation can be the widespread introduction of franchising. Franchising as a method of doing business makes it possible not only to build a system of relationships between small entrepreneurs going into the same franchise scheme, but also to streamline their relations with external counterparties, both small and large. With its help, certain bridges are being built between small and large businesses.

“Franchising”, according to one of the interpretations of this term, means: to be free, to feel a sense of freedom from the fact that in this system an entrepreneur owns a business and controls all the main decisions related to his economy. Franchising allows you to solve the problem of employment of those who, for various reasons, do not have the opportunity to open their own business or organize a business, but can and want to continue or start working fruitfully. It also allows using the labor of young students and persons for whom full employment is impossible - these are housewives or young mothers, retirees, etc. To a certain extent, at a new stage in the development of market relations in Russia, franchising is intended to replace the shuttle business that has begun to wither away ...

One of the most serious problems in the Russian economy is related to the freezing of significant amounts of money by the population, which does not trust banks and stock speculation, as well as various financial schemes after the failure of the well-known pyramids. The population keeps their savings mainly in foreign currency.

The widespread use of franchise systems can significantly increase the economic activity of the population and use these funds to invest in small and smallest enterprises.

Sociological surveys conducted in industrialized countries show that entrepreneurs who have joined a franchise network are more oriented towards success than ordinary entrepreneurs. Thus, franchise systems bring together individuals with clearly expressed positive attitudes. Joint interests form a common vision of both problems and goals and tasks solved in the network. In this sense, franchising is close to network marketing, which gathers under its banner the most adventurous, positive-minded part of the economically active, but free population.

The rapid development of franchise networks has become the most noticeable global trend of the late twentieth century. It is clear that this trend will continue into the new millennium. Russia is today in a state where it is difficult to talk about any general trends in organizational management. However, it can be confidently asserted that by stimulating franchising and its elements as a business management system, the state would thereby lay down certain preconditions for the transition to new, progressive forms of management.

When creating a Russian franchise system, it should be borne in mind that the franchise network consists mainly of small businesses. This means that human factors play a very large role in it.

A Russian entrepreneur is very different from a Western or an Eastern one. He has his own views, intentions, business traditions. In addition, it should be taken into account that Russia is a multinational country, and with the beginning of perestroika, cultural and local factors began to exert a much greater influence on entrepreneurs than in the previous period. Therefore, as in many other areas, direct borrowing of foreign experience is unlikely to lead to success. The community of Russian entrepreneurs itself, taking into account international experience, should ultimately work out the final solutions. In this regard, the role of the recently created Russian Franchising Association is enormous.

Many Russian enterprises have technologies that ensure the creation of a high-quality product that consumers need, and if before they did not have to look for ways and channels to sell their goods to the consumer - most worked on centralized orders, now this has become an urgent problem. However, many entrepreneurs and business leaders cite the lack of working capital, implying that the implementation of an extensive marketing strategy requires significant financial investments, which the company simply does not have. But this is not entirely true - it is franchising that can help to quickly expand its sales markets without investing significant funds.

Indeed, the organization of branches, own sales or production points requires large financial investments, while franchising allows you to save capital by raising capital for the franchisee. The franchisee knows more precisely the conjuncture and peculiarities of the local market, which is an important positive factor. In this case, the main contribution of the franchisor is the trade mark, know-how, technology, while the costs of direct business organization, including the maintenance of the management apparatus, the maintenance of the premises, etc., are borne by the franchisee. At the same time, the franchisor receives a certain percentage of the profit received from the sale of the product: he also receives payment for the use of his name. At the same time, a small amount of invested funds is required, in contrast to the organization of our own retail and production outlets.

In the United States, the rapid development of franchising was facilitated by the 1946 Trademark Act. The entrepreneurs received additional profit already due to the fact that the granting of the right to other enterprises to use their trademarks under the versatile control and protection of the law allowed the owners to expand the boundaries of their business without large additional costs.

Franchising has proven its high efficiency and viability in the mid-70s economic downturn. The position of franchising companies has been all the more solid since the beginning of the 1980s, when during the presidency of R. Reagan, the United States experienced economic growth.

The American literature cited the following statistics: in those years in the United States, one franchise enterprise was opened every 6.5 minutes.

With a great deal of domestic experience, American franchising moved overseas to sprout in other markets. Many companies have sold their franchises in other countries, and some of them are rapidly expanding their international network. Currently, more than 350 US firms and their franchisees own more than 32,000 sales establishments in other countries.

The rapid development of franchising is observed in Canada, Western Europe, Japan, the states of the Pacific region, Australia, and the countries of the Caribbean region. Franchisers from other countries are also looking closely at the Russian market. Apparently, international franchising will develop at an even faster pace in the near future. Franchisers are looking for potential franchisees in foreign countries, and many individuals and firms are actively looking for franchisors from other countries in order to acquire their license and rights and, with their financial support, make their own profitable business on their production and service technologies.

For example, the well-known manufacturer of photocopiers, the Xerox company, has organized an extensive network of centers in Russia for copying any handwritten, drawn and printed documents. To this end, the company, as a franchisor, has established centers in Moscow and other large cities through which it finances the acquisition or lease of premises, supplies copiers and consumables, trains Russian specialists and monitors their activities. This is an example of service franchising, which not only generates significant profits, but is also a powerful means of advertising Xerox products.

The same Xerox company, as well as its competitors, have created wide distribution and service networks for copiers in Russia. All sales companies use the brand names of the manufacturers “Xerox”, “Canon”, etc. Franchisers provide salespeople with the necessary instructions, spare parts, transfer know-how on maintenance and repair of equipment, finance advertising campaigns.

Effectively franchising has been and is currently being applied in the bottled soft drinks industry by Coca-Cola, Pepsi, and Seven-Up. Through the franchise, these and similar companies were able to centrally produce concentrated syrup and distribute it to bottling plants in the United States and abroad, owned and operated by franchisees, who eventually became local retail managers. Franchisees had and are entitled to buy branded bottles and use brand names.

Franchising is one of the ways of doing business, a kind of market relations between two economic entities. The first is the owner of a company that produces products (goods, services or works) and the business model used in this company. The second is the owner of the official right to use this model, as well as the brand, trademarks, corporate identity and other attributes of the main business in his own independent enterprise.

The key object of franchising. This is the name of the set of rights and obligations that accompany a business developed within such a system of relations. In addition, the business model itself is called a franchise.

Franchiser is the owner of the business, the main recipient of income. He creates a business model, which further acts as the object of the contract. In addition to income from the business itself, the franchisor receives royalties from those who use its business model.

Franchisee- is the owner of an independent enterprise who buys from the franchisor for a certain period of time the right to use its business model and related rights. The franchisee earns income from using the franchise.

General understanding of franchising

Franchising can be conventionally understood as the lease of business elements: brand, logo, trademarks, corporate identity, assortment of goods or services, and so on. But the most important thing that the franchisee "leases" is the business model. Thus, the franchisee does not open his own business from scratch, but uses a ready-made scheme, officially acquiring the right to use it from the franchisor. As a rule, a fixed amount is paid for the purchase of a franchise. It creates a major threshold for newcomers to enter the business.

The legality of borrowing a business model is the main difference between franchising and market plagiarism. The business owner is aware that the business model and elements he has developed are used in the interests of other businesses and contribute to their growth. In return, such enterprises share their income with the main company and, in turn, contribute to its growth.

The rights and obligations of the parties are enshrined in the contract. The document also records the financial features of their relationship. For the use of a ready-made business model, the franchisee deducts the business owner either a fixed amount once a period, or a percentage of the proceeds (royalties) received. The franchisor gets the opportunity to expand the business without efforts on his part.

An important point: the franchisee is the owner of an independent enterprise that is neither a branch nor a representative office of the parent company. All legal rights and obligations, income and expenses of each franchisee are separate from the obligations and budget of the parent company.

Video - What is Franchising?

Variability of franchising conditions

This cooperation scheme does not imply any single standard of relations. Unlike general ideas about trade partnerships, representation, distribution relationships, franchising is very variable.

Financial conditions are not the only aspect that differentiates the various patterns of such interaction. Other requirements may also differ. In some franchises, they are as loyal as possible: it is enough to use a trademark, logo, other symbols and assortment. This allows the franchisee to adapt to the target audience and geographic location, to use creativity and their own strategy.

In some franchises, the requirements can be very strict. Here are just some examples of parameters that the franchisor can strictly regulate and control after the conclusion of the contract:

recipe, packaging of goods;
staff uniforms and actions;
layout, dimensions of the premises;
the cost of different types of products;
corporate identity, interior design;
equipment and equipment of the company;
sizes, color of interior elements.

In some franchises, the set of requirements can be very strict. In this case, the franchisee has little freedom of action - he has to strictly follow the instructions. Moreover, the contract may provide for regular monitoring and various penalties for deviating from the instructions - up to the revocation of the license.

To ensure the consistency of the corporate identity and other elements of the business, the main company can send specialists in one area or another (designers, HR managers, etc.), consultants, controllers. At the same time, in some cases, the costs of the work of such employees are included in the budget of the main company, in some they are assigned to the franchisee. This aspect is also regulated by the original contract.

Franchise of the fast food restaurant chain "SubWay"

In addition, the franchise purchase agreement may include certain exceptional conditions. For example, it may be stipulated that only one business in one city, region or country is entitled to act as the franchisee of the parent company. The agreement may oblige the franchisee to limit or completely exclude their participation in the development of certain types of business, cooperation with certain firms - direct or indirect competitors of the main company.

Types of franchising

Summing up certain parameters, there are several main types of franchising:

Commodity- the franchisee acquires the right to sell goods released under a certain trademark to end consumers. Historically, this is the very first type of cooperation under this scheme. In addition to the rights to sell, the franchisee usually receives other rights: service, warranty repair, exchange, consultation, conducting promotions, and so on. The terms of the contract can regulate the range of goods, their prices, terms of sale, and so on.
Industrial- the franchisee produces and sells certain goods, materials, equipment. The main difference from commodity franchising is that the franchisee owns proprietary technology and receives at its disposal special equipment for industrial production. In addition to the production technology itself, the terms of the contract may regulate the composition of the personnel at the enterprise, safety standards, environmental and other standards that the final product must comply with.
Service- the franchisee provides certain services. At the same time, representatives of the main company control the quality and composition of the services provided. Requirements, as a rule, are related to the conduct of promotions and with a representative aspect (design, staff uniforms, and so on).
Business- a separate type of franchising, which is also called business franchising. It differs in that the main company transfers a license to the franchisee to organize this type of business. The transfer of the license is accompanied by detailed instructions on training employees and other aspects of the organization of the enterprise.

It should be noted that franchising does not always refer to any one of the listed types. For example, a McDonald's franchise is a business format, since the franchisee receives a license to do business and detailed instructions for organizing the business. But at the same time it is partly industrial franchising (cooking using a certain technology), and partly service (services for the sale of food and drinks, delivery to the address, a separate procedure for servicing car owners, and so on).

Franchising benefits

Both the business owner and the franchisee have their own advantages with such a cooperation scheme. Efficiency and mutual benefit are confirmed by at least a long history of franchising in developed countries.

What does the franchisor get

By owning a business and selling a license to own a franchise, you can provide yourself with several benefits:

Partners achieve growth without increasing the company's staff. Managers and employees are run by the franchisee and are not part of the main staff. All this simplifies the administration functions for the business owner, relieves him of many financial and social risks. The most difficult problems that threaten the reputation of the company as a whole can be solved by revoking the license.
Income becomes partially passive and increases in quantity. First, the franchisor receives a royalty on sales or a fixed payment. Secondly, the contract can often imply the obligation of the franchisee to purchase certain products, equipment, consumables from the main company - this also increases its profitability.
The franchise advertises itself. Unlike a simple business partnership, a franchise is recognizable among consumers. People who have arrived in another city or country, who have already appreciated the offered products where they were before, will buy them in a new place. That is why a lot of attention is paid to the corporate identity, business model and brand philosophy.
Business expansion costs are significantly reduced. The franchisor does not finance the development of new enterprises - all costs, including construction, renovation, finishing, hiring personnel, purchasing equipment, are borne by the franchisee. The infrastructure of the main business is growing, while the costs of its owner are minimal - in this, franchising approaches the efficiency of a network business.

Of course, the franchisor can get all these advantages only on condition that he has competently thought out the terms of cooperation, took into account potential risks and neutralized them due to rather strict selection criteria.

What does the franchisee get

Buying a franchise can be a suitable decision for both the beginner and the experienced businessman. It all depends on the entry conditions and the potential level of profitability. With proper planning, the franchisee will also benefit. It is as follows:

The business model has already been debugged and tested. This is the main plus of the franchise, especially relevant for beginners. A completely autonomous business needs to be planned and thought out. At the same time, there is always a risk of encountering low efficiency and losing money. A franchise is much more likely to be profitable: if it has been successfully operating for many years, it means that it is effective.
Reduced initial development and advertising costs. This benefit is similar to that which the franchisor receives. The franchised company already enjoys prestige and recognition among buyers. Consequently, it will take much less time and money to get it approved in the market.
The optimum level of autonomy is maintained. The franchisee is not directly subordinate to the business owner. He makes his own management decisions, this is his main difference from the heads of branches and representative offices. The control of the franchisor is primarily aimed at achieving maximum efficiency of the newly opened enterprise - this does not in any way prejudice its legal and economic independence.
Forecasts and prospects are much more accessible than with independent planning. The larger the franchise, the more attention is paid to planning and the more information about business performance is disseminated. Capital investors and business start-ups can choose both the industry and a specific franchise from among competing with each other.
Training is conducted centrally on the basis of an extensive database. The franchisor has information on successes and mistakes, conducts trainings, seminars and master classes. Employees learn much faster. The consultants and experts of the parent company transfer knowledge accumulated over the years and decades.
Problems are solved at the level of the entire business model. Cohesion and common management principles imply that management accumulates information about existing problems and finds common solutions. This eliminates the need to develop an enterprise "by trial and error."
The overall credibility of the business increases the loyalty of local partners and buyers. The business reputation and philosophy have already been built by the business owner - all that remains for the franchisee is to competently dispose of the existing potential of opportunities.
There are no problems with the supply of special equipment, consumables, and so on. Either the main company acts as a supplier for franchising enterprises according to the terms of the contract, or it coordinates supplies and acts as a guarantor of transactions, or makes recommendations based on existing knowledge - in any case, it is much easier to arrange supplies than when developing a fully autonomous enterprise.

The list of advantages of a franchisee looks very impressive, although it cannot be said that it is completely free from market risks and from all the difficulties associated with the formation of an enterprise that retains legal and financial independence.

Are there any disadvantages to franchising

There are no perfect business schemes. Despite the vast benefits, franchising has its drawbacks. They relate primarily to franchisees, because the risks of a business owner differ little from the risks that would arise under any other business management system.

So, what are the negative aspects of buying a franchise:

The agreement imposes restrictions on decision making. Regardless of personal opinion and the current economic situation, the franchisee cannot perform certain actions.
Control of supplies, on the one hand, allows you to quickly establish them; on the other hand, it restricts access to the free market. If the prescribed terms of delivery are not the most favorable, the franchisee is still forced to accept them.
The larger the franchise, the more difficult it is to enter the business. We are talking about financial fees, mandatory purchases, creating a corporate identity, and so on. In some cases, starting a franchise business is more expensive and longer than a fully autonomous one.
The royalties paid by the franchisee are used by the business owner at their own discretion. Consequently, if the business owner makes an ineffective decision, then part of the income received by the franchisee will be canceled or even lost.
The contract may involve obligations not only when entering a business, but also when leaving it. For example, a franchisee may be deprived of the opportunity to participate in the development of competing enterprises for a certain period.

Despite these disadvantages, franchising is one of the most popular schemes in the world today. It has almost a century of history and great prospects in various countries, including Russia.

Prerequisites and development of franchising in the world

The founder of the American company "Singer" is considered the historical ancestor of this phenomenon and the first franchisor. On the basis of an agreement, he transferred to his distributors not only representation and trade, but also the right to repair branded sewing machines. Each contract of this first franchise was valid for a specific part of the country.

A prerequisite for this phenomenon was a consequence of the development of the sales network: Singer sewing machines were successful and were sold throughout the country. Consumers needed qualified specialists from the same company to service and repair the devices. Instead of setting up subsidiaries across the country on his own, Singer decided to transfer the maintenance rights of the machines to financially independent firms. Thus, repair and maintenance were the first services that complemented the functions of distributors and made them a franchisee.

As a mass phenomenon, modern franchising has existed since the 1920s. Initially, it extended to the production of consumer goods, then to the oil and gas sector, and from the second half of the last century to various services. The financial crisis in the United States destroyed many large corporations, and the cooperation of business owners with financially independent partners - franchisees came to the fore.

"McDonald's" is the world's most famous franchise

A classic, textbook case of turning a business into a franchise is the founding of a McDonald's restaurant. Initially, the American entrepreneur Ray Kroc was interested in a small popular restaurant. However, instead of simply outbidding it, he entered into an agreement with the owners for the right to establish similar restaurants throughout the country. Thus, he replicated a successful model instead of competing with other standalone restaurants.

McDonald's franchise

The key point of this deal was that Kroc focused his attention on the business model itself. It is believed that this is the first time that a business format franchise has been established that is in use today: the franchisee not only acts on behalf of the business owner, but also uses the same business model. Currently, all McDonald's restaurants (as well as many other similar chains), despite their differences, use the same business principles.

Today McDonalds remains one of the world's largest franchises: only 15% of restaurants are owned by the corporation itself - the rest are owned by franchisees. It should be noted that entering a business is quite expensive, and the terms of the contract govern all the nuances of doing business. The situation is similar with another largest global franchise, the clothing corporation Columbia. Thus, the Columbia franchisee is obliged to comply with strict requirements for the trading floor and purchase the first batch of goods from the main company for 80 thousand dollars or more.

Formation of franchising in Russia

On Russian territory, franchises developed with a great delay in comparison with the United States, Western Europe and other countries. Only since the 1990s, after the transition to a market economy, the very principles of implementing franchising within the framework of Russian legislation became possible. True, at first in this area, as in other areas of Russian business, chaos predominantly reigned.

The first successful franchises in Russia are “G. MR Planet of hospitality "and" Sportmaster ". Since 1997, the interests of participants in this sector of the market have been consolidated - the Russian Franchising Association has appeared. By 2003-2004, there were already more than ten franchises, this way of doing business began to attract forward-thinking participants in the business environment.

As for the crisis of 2008-2009, it had an ambivalent impression on Russian franchising. On the one hand, the number of companies (as well as business entities in general) has declined. On the other hand, after the market recovery in 2010, the renewed business environment in Russia began to use franchising much more actively. In 2011, the total number of franchises was double the pre-crisis 2007 figures.

Finally, the crisis of 2014 became critical for many Russian franchises operating on the basis of an agreement with foreign partners. The sale of branded clothing has been particularly hard hit. The rise was recorded in areas that do not depend on imports: services, tourism, microfinance, and so on. Today the largest franchises in Russia are 1C and X5 Retail Group - the owner of the Pyaterochka, Perekrestok, Karusel brands.

Franchise Buying Instructions

Despite the diversity of the market, the general procedure for choosing and buying a franchise can be reduced to a fairly simple, general algorithm.

The future franchisee analyzes the market and makes a preliminary selection. The main criteria are the prospects of one direction or another in a particular place, the level of competition, the amount of initial investment, and personal interest.
Next, you need to collect as much information about the franchise as possible. In order for the information to be complete, you need to request it from the franchisor's representatives, record it during public events, and obtain it from open sources (including independent ones). Additionally, it is worth talking to existing franchisees.
If the franchise looks promising, you need to analyze it from a legal point of view- examine the documents for the conclusion of the contract. It is important that the analysis is carried out by an experienced professional who can detect implicit legal gimmicks and gaps, if any.
When there is already a general plan for buying a franchise, a detailed one is needed. It is necessary to analyze the target market, assess the financial prospects of the future enterprise, plan an advertising campaign, outline the payback periods and levels of profitability.
The final stage of preparation is the selection of premises, personnel and (if necessary) suppliers. Before concluding an agreement and starting to organize the enterprise itself, you need to be sure that there will be no problems with any of the aspects: neither with the territorial, nor with the personnel, nor with the market.

When the preparation is completed, you can conclude an agreement with the franchisor and start implementing the plan.

Franchising provides significant benefits to both the owner of the parent company and each franchisee. In order for the mutual dependence of the subjects to be beneficial, not harmful, it is necessary that the franchise be fully thought out and that its effectiveness be of interest to all participants in the system, without exception. In this case, both the franchisor and the franchisee can count on a stable income.