What is a franchise in simple terms. Types and types of franchises. The most famous example of a franchise is McDonald's.

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

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

From the article it becomes known:

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

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

So, let's begin!

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

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

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

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

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

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

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

Franchisor and franchisee - who is it?

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

How does it work in practice?

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

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

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

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

1.2. Related terms related to franchising

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

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

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

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

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

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

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

• franchise agreement;
• license agreement;
• commercial concession agreement.

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

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

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

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

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

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

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

The franchise package must include:

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

Manuals necessary for the correct work of personnel, software, etc. may also be attached.

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

Franchisers who value their business reputation take a very responsible approach to the formation of a franchise package.

Take note!

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

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

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

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

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

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

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

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

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

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

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

What are the franchises - 7 main types and types

3. Types and types of franchises - 7 main varieties

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

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

Type 1. Classic or standard franchise

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

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

Type 2. Free franchise

On the territory of the Russian Federation, it is this form of commercial concession that has received the greatest use.

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

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

Type 3. Import-substituting franchises

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

Since the import into our state and the sale of some of these goods and products is now prohibited, Russian entrepreneurs are striving to enter this market and offer consumers similar goods, but made in the Russian Federation.

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

Type 4. Silver franchise (turnkey business)

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

This is a very convenient way to start your own business for those who do not have much entrepreneurial experience. First of all, since there is no possibility of making a mistake at the stage of opening an enterprise, and the possibility of a created business not meeting the trademark standards is also excluded.

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

Type 5. Business for rent

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

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

Type 6. Golden franchise (master franchise)

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

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

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

Type 7. Corporate franchise

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

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

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

Franchise business - the main pros and cons

4. Advantages and disadvantages of a franchise business

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

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

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

Pros (+ ) starting a business with a franchise

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

Plus 1. Minimal risk when doing business

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

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

Plus 2. Brand awareness

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

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

Plus 3. Quick profit

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

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

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

Plus 4. Minimal spending on advertising campaigns

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

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

Plus 5. Ability to receive support and receive training

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

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

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

Disadvantages (− ) of Franchise Business

There are also five main ones.

minus 1. Lack of “self-maneuver” capability

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

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

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

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

Minus 3. High price for franchises

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

Minus 4. Control by the brand owner

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

Minus 5. The impossibility of applying a creative approach

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

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

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

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

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

Popular franchises for small and medium businesses

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

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

1 place."McDonalds"

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

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

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

2nd place. Popular chain of supermarkets "Perekrestok"

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

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

3rd place. Subway Restaurant

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

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

4th place. "Coffee to go"

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

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

5th place. "Orange Elephant"

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

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

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

6. FAQ - frequently asked questions regarding franchises

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

Question 1. How to choose the right franchise?

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

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

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

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

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

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

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

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

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

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

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

The cost of concluding a franchise agreement can be different.

The price depends on several factors:

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

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

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

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

KFC restaurant franchise

Question 4. Is there a franchise without investments?

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

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

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

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

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

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

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

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

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

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

7. Conclusion + related video

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

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

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

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

Franchising, to put it simply, is an opportunity to open your own store, but with a sign of a well-known company. At the same time, they will help you find a room, and recruit staff, and make repairs, and even ship the goods, the main thing is not to forget to pay bills on time.

Now let's try to understand this issue in more detail.

Why do I need a franchise?

If you are thinking about starting your own business, most likely you have already begun to ask yourself such questions: where is the best place to open it? What is the best rental price for my business? From whom to buy goods? What kind of markup should be made on it? How much do I need to spend to start and how much can i earn?

And these are just a few of the questions that a novice entrepreneur has yet to answer.

A smart person learns from the mistakes of others -

Franchising was invented for such people.

Before offering his franchise on the market, the franchisor, that is, the franchise owner, must first of all "bring to mind" his business system, work out all business processes and prove the effectiveness of his business. The franchisor must have an already operating "reference" enterprise, which he uses when "cloning" under the franchising system. Therefore, when you buy a franchise, you are acquiring an already proven and proven business model that has proven its effectiveness.

By purchasing a franchise, you will receive answers to all the questions that interest you, as well as those that you have not even thought about yet. Thus, you can start your own business, while protecting yourself from most of the risks of a novice entrepreneur.

How much does a franchise cost?

To answer the question about the cost of a franchise, you first need to figure out what makes up the total amount of investment in starting a new business. Usually these are the following positions:

For this assistance, you will need to pay the franchisor . This is a one-time payment that is paid when buying a franchise. It usually ranges from 5 to 10% of the total investment in the discovery. Many franchises don't have a lump-sum fee at all! In fact, of course, there is one, since there are no altruists among franchisors. It is simply “hidden”, for example, in the form of a mandatory purchase of goods or equipment from the franchisor.

You will have to pay for this support. These are regular, usually monthly, payments. Royalties can be fixed (for example, 15 thousand rubles a month), and sometimes depending on the volume of your income or profit - in the form of% of turnover. There are franchises that operate without royalty at all - but in this case, you will usually need to make regular purchases of goods from them.

Do not think that a franchise is a kind of employment. Your business will remain yours, and you will manage it completely independently. The franchisor will only be able to give advice and recommendations to protect you from making wrong decisions.

Is it possible to open a store through a franchise?

It is a common misconception that franchising is focused only on retail. Of course, store franchises account for up to 70% of the volume of this market, but in the remaining 30% you can find a lot of interesting things.

First of all, of course, these are catering establishments - cafes and restaurants, coffee shops and sushi bars, burgers and sandwiches. The most famous catering franchise is. Unfortunately, it is practically impossible for an ordinary person to buy it in Russia - you need to have the broadest connections and colossal investment opportunities. But you can consider offerings from competitors - for example, it offers a much more affordable option to start a fast food business. You can easily open a restaurant KFC, and the company G.M.R. hospitality planet offers a choice of franchises for connoisseurs of any cuisine - from traditional Russian ( ) and ending with Italian ( and Viaggio), Japanese ( little japan), Middle Eastern and Far Asian ( , Yamkee).

But franchising doesn't stop at restaurants either. Are you interested or information Technology? We are ready to offer you a wide range of online store franchises, as well as franchises related to the development and maintenance of software.

Do you want to provide services to the population, work in the field? Please - in our catalog of franchises you will find many offers from fitness clubs, beauty salons, hairdressers.

love cars since childhood and always dreamed of turning your hobby into a source of stable income? Consider offers from companies related to - styling services, taxis, car services, auto parts dealers and even car rentals - you can earn money on all this!

Franchising is easy!

Thus, you can open a franchise for absolutely any type of business. You will need to pay a lump-sum fee and regularly pay royalties, and for this you will receive assistance at all stages of the opening and ongoing operation of your enterprise. At the same time, all the income that you will receive from the work of your enterprise will remain yours, and the business will be completely under your sole control.

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

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

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

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

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

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

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

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

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

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

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

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

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

3. A package of documents that the franchisee receives

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

This set of documents includes:

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

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

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

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

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

4. Pros and cons of a franchise business

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

Positive parties when buying a franchise:

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

Now about the inevitable negative aspects of the concession:

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

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

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

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

View 1. Free

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

View 2. Classic

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

Type 3. Import substitution

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

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

View 4. Silver

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

View 5. Corporate

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

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

View 6. Business for rent

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

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

View 7. Golden

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

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

6. Examples of franchises - 5 most popular

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

TOP-5 franchise offers in Russia in 2019:

1. "Pyaterochka" - the most popular network of grocery supermarkets. More 5 000 stores operate under this brand in Russia. Known for introducing the concept "reverse franchising", that is, there is no royalty, but there is agent's commission for the sale of goods.
2. 33 Penguins is a chain of ice cream parlors that also sell pastries and desserts. Works on the territory of Russia and the CIS, has 42 own points of sale and 1 700 franchised points. innovation 2016 year was the release of a product line for vegetarians, diabetics and healthy lifestyles.
3. Ascona is the largest manufacturer of mattresses, beds and pillows in Russia and Eastern Europe. 285 franchise outlets, 398 own stores. Owner "Stamps of the Year No. 1" in 2011 and 2013 years.
4. Independent laboratory Invitro is a leader in the provision of services in the field of medical laboratory research. High reputation in the field of franchising allowed to attract more 60 % of franchisees who opened not one office, but two or more.
5. champion – a network of football clubs for young children. 261 franchise business and 80 own allow to reach a large audience of children aged from 3 before 7 years. Franchising is developing 2014 years and quite successfully.

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

7. Answers to newbie questions (FAQ)

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

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

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

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

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

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

Question 2. Is a franchise business suitable for beginners?

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

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

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

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

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

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

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

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

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

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

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

8. Conclusion + video material on the topic

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

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

Franchise, or franchising has a single meaning. This is a business creation model: one company transfers to another the right to work under its own brand, use the developed technologies, support and reputation.

Such a business model increases the chances of survival for a novice businessman. For serious companies, this is a reliable way to penetrate and quickly conquer the market.

What is a franchise in simple words

Suppose you decide to occupy a profitable niche in the zoo services market - to open a hotel for animals in your city. Cat and dog hotels provide comfort and safety for pets while their owners are away on holiday.

Starting from scratch is risky: you need to conduct market research, create and promote a business, register a trademark. But it attracts a quick start, a close goal, the ability to shorten the path to the first profit. Therefore, the idea arises to enlist the support of a well-known company and buy a ready-made business.

There is a founding company with an already popular brand name. For you, this company is a franchisor. It gives you, the aspiring entrepreneur, the right to run a profitable business model. After concluding a commercial concession agreement, you are proudly called a “franchisee” and can enjoy all the benefits of a promoted brand.

At your disposal:

• proven business scheme and marketing;
• recognizable trademark;
• a well-established methodology for furnishing a hotel, hygiene and disinfection of rooms, installation of round-the-clock video surveillance and anti-stress music;
• design of zoohotel and zootaxi;
• selection and training of veterinarians, qualified specialists for supervision, care and grooming;
• client base;
• business automation: IT-technologies, information on the websites of the company and partners, setting up SMS and e-mail notifications for customers;
• privileges;
• production of branded carriers for animals;
• advertising campaigns.

A concession is a format of a formal agreement on the transfer of exclusive rights for commercial purposes for a certain period. The agreement is drawn up on the basis of the law on the protection of intellectual property and contains information on the terms of payment for the franchise: a lump sum or royalties.

The lump-sum fee is the price of injecting into the franchise network, in other words, a one-time payment. The value is calculated from the sum of the costs of the franchisor when creating and launching a franchise company. There is no single calculation - companies determine such principles individually, based on the costs incurred or the expected profit of the franchisee.

Starting your own business, in addition to the advantages, also brings with it certain risks, especially at the very beginning. Franchising is one of the safest ways to start a business. It is believed that franchising originated in 1851 in the United States, and concerned the maintenance and sales of the well-known Zinger sewing machine. Today, franchising is becoming more and more popular. It is distributed all over the world, but the United States remains the leader.

Franchise vs Franchise: What's the difference?

Franchising is a specific relationship scheme designed to create and run a business. The subjects of this system are two parties, for which the following terms are used:

• franchisor;
• franchisee.

The first party owns a trademark under which the second party to the contract wants to work. Franchisees will need funds to purchase a franchise. In addition, it must meet certain requirements of the trademark owner.

Based on the decision on cooperation, an agreement is drawn up. Its conditions in each company may differ, but its essence is that the franchisor, for a fee, transfers the trademark to the franchisee for use along with the established technology for the provision of services or the production of goods.

The franchise agreement itself, or rather, its object, is called a franchise. In simple terms, franchising is a business organization system, and a franchise is a set of benefits and advantages necessary for doing business.

Franchising and franchise are related concepts. Basically, there is little difference between franchising and franchising. Franchise is a package that is bought from a company (a complete business system), and franchising- the purchase process or the name of the transaction.

A ready-made business with a scheme of work that has proven itself well - this is what a franchise means. It is called an advanced form of licensing. This is due to the fact that in translation the word franchise (franchise) sounds like a license, a benefit.

Below is a video where a businessman explains in simple terms what a franchise is:

The buyer receives a ready-made technology, in other words, detailed instructions on how to create an operating business under the trademark of the purchased franchise. But before buying, you need to find out under what conditions the franchise is granted.

What is included in the franchise package

In order for a franchise to be competitive, you need to know in advance what you are buying and what level of support you are guaranteed. The franchise package may include:

• support at the stage of opening and functioning of the enterprise;
• training;
• business technology information;
• use and technologies of production and sale of products;
• advertising support.

Other items may be included in the list. Before buying, you need to clarify which services are included in the package, and which are provided only for an additional fee.

Franchise types

There are several types of franchising.

• Industrial. It is most often based on the transfer of a license for the manufacture of patented products.
• Commodity. It boils down to the acquisition of a marketing scheme for a group of goods that are produced by the parent company. Used to implement well-known brands.
• Business. It has much in common with commodity franchising. It is based on the use of a trademark and business technology using techniques that have been developed in the parent company.
• Conversion. The form of doing business is the possibility of changing the main profile of the company.
• Child. Allows you to create an independent business under the leadership of the parent company. This type of franchising has not yet received proper development.

The classification is rather arbitrary. In different countries, "franchise" can mean different concepts.