IN lately Opening a franchise business is becoming popular among aspiring entrepreneurs. This practice has flourished for quite a long time in the United States of America and has only recently begun to develop in Russian Federation but despite this, for short term She managed to conquer a certain niche in the market. The popularity of franchising business is based on a large number of advantages, among which are the following:
- - the opportunity to enter the current promising business;
- — low entry barrier;
- — availability of sufficient information for accurate forecasting financial results activities;
- — favorable conditions lending to the franchisee, provided that the franchise owner acts as a guarantor;
- — no need to invest in product promotion;
- — comprehensive business support for franchisees from the company owner;
- — no need to study the market and search for free niches.
Considering the above advantages, we can conclude that it is better not to take risks trying to implement new ideas, but to take advantage of the partnership offer from leading companies that have won high positions in the market.
By concluding a number of agreements, the entrepreneur gets the opportunity to conduct activities on behalf of the company and make a profit, in turn, the company acting as a franchisor can expand the sales market and obtain additional capital.
Before moving on consideration of the implementation of specific business ideas for franchising, need to understand the main categories of this business, namely, what constitutes cost, royalty and lump sum.
Lump sum payment- this is the cost of the franchise, namely a one-time fee for entering ready business and obtaining the opportunity to work on behalf of the company. Royalty is the amount of a mandatory, regular payment to the franchisor to cover the costs of developing the system.
Under a franchise, you can open any establishment that sells goods or provides services; the main thing is to choose the right offer and draw up all the necessary agreements.
How to open a franchise travel agency?
Purchasing a franchise is in the best possible way to open a travel agency because it becomes possible to take advantage of a well-established name that inspires trust among clients.
It deserves attention that opening a travel agency on your own requires a lot of money. starting capital, having connections with tour operators, conducting a large-scale advertising campaign and many other expenses that take a long time to pay off.
While, having opened your own franchise business, you can easily log in operating business and work on behalf of a well-established travel agency.
To conclude mutually beneficial agreements, you will need to make a lump sum contribution, monthly royalty and other necessary payments, after which you can start working and making a profit.
Today, the Russian market offers a large number of franchises for opening a travel agency. For example, until the end of 2013, you can purchase a franchise called “Chain of Hot Ticket Stores” with an investment of 400,000 rubles.
The lump sum fee and monthly royalty are equal to 13,000 rubles. The conclusion of the agreement gives the owner the right to use the trademark, receive accounting and legal advice, participate in marketing activities and apply for assistance in resolving controversial issues.
In addition to the above rights, the opportunity to contact tourist support abroad or a Call center deserves attention.
Study the numerous experiences of other entrepreneurs who have created their own successful business with a franchise you can in the section of our website:
The most successful and informative case, according to the editors of the Russtarup portal:
An interesting experience of creating a business under a franchising program is presented
We open a bookmaker's office.
To date the best option To open a bookmaker's office is to purchase a franchise. It is by choosing such a strategy that you can open a successful bookmaker’s office without much difficulty, which will actively develop and generate profit from the first days. Bookmakers-franchisors provide assistance to their divisions in such matters as:
- — consulting;
- — activity planning;
- - implementation advertising companies;
- — selection and training of personnel;
- — searching for premises and equipping it with everything necessary for the operation of a bookmaker’s office.
Russia and Ukraine is the first step to starting a successful business with an easy and simple start.
When making a decision to purchase a franchise, you need to consult the professional recommendations in this section:
How to open a cafe as a franchise?
Among huge amount franchises in all industries, the most popular offers are catering. You can open a cafe on your own, but it will take time to study the market, identify needs and develop your own circle of clients.
To avoid unnecessary expenses, risks and a huge waste of time, it is better to join the existing business of a thriving cafe. For example, you can purchase an ice cream parlor franchise called “33 Penguins”; this will require an investment of 1.2 million rubles.
The lump sum contribution is 350 thousand rubles, and there are no royalties at all. The return on investment is very high; in six months you can not only return the money spent, but also increase it.
After signing all necessary agreements, the franchisee receives regular supplies finished products, assistance in organizing a business, advice on choice necessary equipment, assistance in carrying out profitability calculations and support at all stages of activity.
We open a successful restaurant with the help of a franchise.
Opening a restaurant as a franchise is quite a promising business, since it is possible to work under a well-known name that is well known to potential customers.
It is also worth considering the possibility of receiving advice and support at the initial stage of work, as well as the opportunity to take advantage of existing experience in creating a menu, recruiting, training employees and arranging the interior of a restaurant premises.
In order to take advantage of the above opportunities, you need to select the restaurant franchise that is optimal in all respects and purchase it.
How to open a successful dry cleaning franchise business?
The demand for dry cleaning services is growing every year, so it’s worth thinking about implementing this business idea. You can, of course, open it yourself, but you will need to spend money on it. big capital and a lot of time to conquer your niche in the market. It is much easier to purchase a franchise, which gives you the right to use a well-known name for dry cleaning, reduce the cost of attracting customers and receive the necessary help and advice in the process of organizing your own business.
Today in the Russian Federation there is a wide offer of all kinds of franchises. You can view current offers in the catalog posted on our website.
If you have a desire to choose a franchise, be sure to use it and then you can easily select the necessary offers. To increase ease of use, all offers in the catalog are structured, so that everyone can easily understand and choose the most suitable option.
Many people dream of opening their own business, but cannot decide to take such a step. The main reason for indecision is the lack of an idea and fear of risk. Therefore, franchise business is increasingly attracting the attention of newcomers. Let's understand the essence of franchising and learn about its pros and cons.
What is franchising
To understand the intricacies of franchising, you need to understand what it is. Under the foreign word lies the opportunity for any person to work under the name of the brand they like. And it doesn’t matter whose logo it is – Russian or foreign. The main thing is that the consumer knows it, and the owner gives the opportunity to make money on his name. A franchise is an agreement offered by the owner of a brand to an entrepreneur.
Franchising is very convenient - you don’t have to wait for ideological inspiration, think about advertising, ratings and demand. Everything has already been done for you. The franchisor (owner or representative of the brand) explains in detail to the franchisee (entrepreneur who signs an agreement to conduct business under a certain franchise) the intricacies of doing business. All risks, estimates have been calculated, and step by step instructions. This is what attracts people who have no experience, or those who tried to open something of their own, but it didn’t work out.
A franchise is an agreement offered by the owner of a brand to an entrepreneur.
Financial side
So, you are offered a ready-made case. Take it and use it. But the brand owner is ready to share not just like that, but for a certain fee. These conditions may vary for each franchisor.
What you must pay the franchisor:
1. Lump sum payment.
This is the initial payment that is required to enter into a contract. Is it a kind of brand rental fee or membership fee. Sometimes these contributions are so large that a novice entrepreneur simply cannot afford the amount.
2. Royalties.
The monthly payment is in favor of the owner and it depends on the percentage of the franchisee’s income. In other words, an entrepreneur needs to pay a kind of profit tax to the brand owner every month for the opportunity to receive income.
But not all franchise forms include these concepts. It all depends on the specific case. Some companies only charge a lump sum fee, while for others it is zero and the franchisee only pays royalties. But it also happens that the brand owner demands payment of both a lump sum fee and a royalty. Therefore, it is worth assessing your capabilities in advance so that you do not have to take off your rose-colored glasses at a certain moment.
There is, of course, another way to open a franchise business - without investment. The principles of a franchise without investment are that an entrepreneur applying for such a right must convince the owners of the trademark that his candidacy will improve performance, but this great job. Only in rare cases does the franchisor become an investor for the franchisee.
The franchisee must pay a lump sum fee and royalty to the brand owner.
Pros and cons of a franchise
In this direction, as in any other type of business, there are advantages and disadvantages that need to be known in advance. Creating a franchise is a serious work aimed at regulating the relationship between the brand owner and the tenant.
Pros
1. Fame trademark.
The popularity of the company inspires consumer confidence. There is no need for promotion or PR. Seeing a familiar name, the client will come on his own, and not out of curiosity, but to purchase a product or service. Onlookers who do not belong to the required contingent will be bypassed.
2. Business support.
The franchisee will never be left without attention, necessary instructions and training. For any reason, you can contact a specialist. At the first stage, assistance is provided even in the design of the room, if required by the brand. In another type of business, a beginner will have to solve all the issues on his own.
3. Guarantee to the bank.
If you have a desire to open a business, but there are not enough funds, then you need to go to the bank, but it happens to a beginning entrepreneur. When choosing a franchise, the brand owner will support you; he will guarantee the return of the loan funds to the bank. Agree that it is safer to provide funds for an already established business than to later look for a bankrupt client.
Cons
1. Harsh conditions.
It is necessary to work under certain conditions dictated by the owner. Deviation from even one point may result in fines being imposed on the brand tenant or termination of the franchise.
2. The rights of the franchisee extend only in accordance with the signed agreement.
If the brand suffers losses or goes completely bankrupt, then the entrepreneur who leases the right to work under this brand will have to fold, no matter how well things are going for him. The fact is that if the supplier of a product or equipment disappears, the supply of what the franchisee depends on stops. The risks are high, especially if you do not study the economic side of the prospective partner.
It is also worth paying attention to what conditions the brand owner dictates when terminating the contract. There are situations when an entrepreneur is not satisfied with a new business only after the project has been launched or other circumstances have arisen to close the business. But some types of franchises strictly stipulate that they have the right to sell your department to another entrepreneur at a lower price.
The rights of the franchisee extend only in accordance with the signed agreement.
3. Limitations in the choice of suppliers.
You can purchase equipment or raw materials only from certain persons, which may be disadvantageous in terms of location. Attempts to circumvent this clause will result in termination of the contract.
4. Expenses.
Do not forget that all expenses for registering a business, purchasing premises for work, purchasing goods, equipment or raw materials remain on your shoulders.
Legal regulation
When thinking about opening a franchise business, you need to study legal regulation such an agreement. Franchising in Russia is a relatively new direction in business, so laws directly related to this type of activity have not yet been adopted. For Russian business The concept of “commercial concession” is suitable, the principles of which are prescribed in Chapter 54 of the Civil Code of the Russian Federation. But it's not serious legal form, and therefore some entrepreneurs try to pass off a completely different direction in business as a franchise, having absolutely nothing to do with the brand. So it is necessary to understand that the creation of a franchise must be confirmed by a written agreement, which spells out the rights of the parties.
Franchise registration is carried out only by the department that issued the right to a certain brand to its owner. If such registration of the agreement is not made, the transaction will be considered illegal.
To eliminate all risks and surprises, you need to look at a sample contract for the brand with which you intend to cooperate. You can request it from the company or view it on the official website. Also standard contract franchise can be downloaded from websites where catalogs of companies offering franchising are compiled.
Franchise business areas
First you need to study the areas of franchising that are offered in Russia. There are a lot of varieties, because the development of franchises does not stand still. Entrepreneurs, when opening a business, very often, without trying it out on their own, start selling franchises.
Types of activities:
1. Retailing.
Network retail view activities. For a franchise, it is proposed to open a store that is known in many regions. For example, the familiar stores “Pyaterochka”, “Perekrestok”, “Magnit”, “L’Etoile”.
2. Catering industry.
This is a very popular type of business because food is always in demand. A successful example can be called “Subway”, “McDonald’s”, “Kroshka Potato”, various companies, offering coffee to go.
3. Production.
This is a very diverse type of franchise, which gives you the opportunity to choose a direction: in food, growing certain crops, for example, exotic flowers for flower salons. Mini-bakeries or retail outlets where production and sale of products are simultaneously carried out are becoming widespread. Example - “Russian Pies”, “Pokrovsky Bakeries”. This direction is very profitable because bread is bought every day. If there is supply that matches demand, then the type of production is chosen correctly.
4. Products for children.
Toys, food and baby care products. In this case, you need to study the competition in your city or another locality so as not to remain at a loss.
5. Clothes and shoes.
Products from well-known and not so well-known brands also provide great opportunities to choose the direction of franchise business development.
6. Products for women or men.
These can be specific attributes: jewelry, watches, spare parts for certain brands of cars.
A more complete classification of types of franchising in Russia is available on specialized websites that provide similar information. In the franchise directory, you can select various companies and receive information about ratings and reviews from existing franchisees.
To purchase a franchise, you first need to register an individual entrepreneur. Franchise activities are only permitted commercial organizations or individual entrepreneurs. Individual Can't do business without registration.
To purchase a franchise, you first need to register an individual entrepreneur.
First, study the situation in your city. It is possible that the type of activity you are interested in is already present on the market. Next, evaluate your financial capabilities, because any business requires investments. If the costs of a lump sum contribution are excluded, you will still have to spend money on premises, the purchase of goods or raw materials, equipment. Think about whether your responsibility to your consumer and partner scares you. Letting down a respected product brand means losing profits. Therefore, carefully study your responsibilities before signing the contract. Don't forget about statistics. Statistics are an important parameter that can be the main one when a businessman makes a choice in favor of a certain form of franchise.
Think about what the payback period for your investment might be. To do this, you need to talk to those entrepreneurs who are already in business to understand which technology works 100%. Although the owner of the trademark provides detailed reports and a business project, it is necessary to take into account not only the central regions of Russia, but also the outback, because the incomes of the population are different.
Let's give an example. The entrepreneur decided to expand his activities. I saw that there were few luxury furniture showrooms in the city and chose a narrow direction - kitchen furniture. I chose the Maria Kitchens brand as a partner. Spent it on rent retail space, where the main samples of the factory should be located, and purchased samples. The brand owner gave a big discount on exhibition kits, but made demands that showroom samples not be sold for a certain period. The entrepreneur also thought that he would need funds to spend on computers with the factory’s design program, but they were also provided for free. After staff were hired and trained by the manufacturer, the salon began operations. But, despite the fact that preparations for the opening of the salon were successful, there are no clients. And all because the entrepreneur did not take into account that the cost of a set from the Maria’s Kitchen brand is at least 100,000 rubles. This is practically inaccessible to the bulk of consumers in the region, where average salary is only 20,000 rubles. It’s a completely different matter when the salon is opened in a big city, where more people with high income.
Terminating an agreement that has already been signed can lead to serious problems. To avoid problems, preparation must be very thorough. In order to check the reliability of the chosen direction, you need to find contacts where you can contact representatives. If the site only has a form where you can write a message and wait for a response, you should not deal with this company.
In order to check the reliability of the chosen direction, you need to find contacts where you can contact representatives.
Let's sum it up
At least franchising as a type entrepreneurial activity For Russia, this is a new concept, but it is gaining momentum rapidly. The pros and cons of such a business are already obvious; there is experience that entrepreneurs share with each other in order to avoid serious mistakes.
The choice of type of activity is very large. If you study the main types of franchises, you can choose something that will bring not only income, but also pleasure. There is no serious regulation of the process by regulatory authorities, but with the support of an experienced lawyer, pitfalls in the agreement can be eliminated.
Having considered the main aspects of running a franchise business, we can only say one thing: if there are no ideas for development own direction, then it is worth taking advantage of the experience of those who have achieved great heights and gained respect from the consumer.
Comprehensive right to use a trademark or brand, as well as technologies, business methods and other forms intellectual property, which one company sells to another in order to expand the network. The franchise price consists of a lump sum (basic payment) and royalties (monthly payments).
According to the rules of franchising, the franchisor company (selling the right) undertakes to research the market in your locality and make a conclusion whether the business will be successful for the franchisee (the party buying the right). However, many companies (especially if there is a large lump-sum payment in the contract), trying to quickly get their profits, may deliberately not notify you of low demand for products or services. Therefore, before you buy a franchise, you must independently study the product you are interested in and conduct a market analysis and target audience.
What are the types of franchises?
Based on the type of activity, there are three main groups of franchises:
- Production- production of products according to company standards and under its brand. With this form of cooperation, the franchisor must provide you with all technological sequences and provide a list of suppliers of raw materials and equipment to equip the production complex.
- Trade- sale of branded goods produced by partners identified by the franchisor. With such cooperation, the franchisor determines from whom you will purchase the goods and at what cost to sell them, chooses where the store will be located and what size it should be.
- Services- provision of services under the company brand. The franchisor must provide you with instructions on the procedure and conditions for the provision of services, as well as train hired personnel.
According to the form of implementation, a franchise can be of two types:
- Straight- transfer of the right to open one or more representative offices in the region. Such franchises do not require large investments and allow you to easily enter the market.
- Master franchise- transfer of exclusive rights to all representative offices in the region. By purchasing such a franchise, you will be protected from the possibility that other companies will open in your region using a similar model.
Depending on the terms of the contract, the following types of franchises are also distinguished:
- Standard- the franchisor controls all stages of the company’s activities and does not allow deviations from the standards it has adopted. This format is suitable for beginning entrepreneurs because it allows you to avoid many mistakes.
- Free- the rules of operation of the franchisee's enterprise are established conditionally. This franchise is suitable for experienced investors whose main goal is to quickly enter the market.
- With replacement- technologies and work methods are established by the franchisor, but you can choose suppliers yourself. This format is convenient for manufacturing enterprises in remote regions.
- Ready-made company- the franchisor opens a representative office, fully dealing with organizational issues, and then sells or leases it to the franchisee with the subsequent payment of royalties. This model requires a high initial investment in the business, but it is also the simplest method that begins to generate profits in the shortest possible time.
How to choose the right franchise
Once you have decided on the direction and type of goods or services, you should begin searching for suitable offers. To do this, you can conduct independent market research or use online catalogs(franch.biz, franshiza.ru, beboss.ru, greens-idea.com). To choose a reliable franchise, the following instructions will be useful to you:
- When choosing a direction, pay attention to the cost of the franchise. The latter includes a lump sum fee and royalties, which are paid for the right to use the trademark and business model, but do not imply the costs of equipment, rent and the first purchase of goods or raw materials. This means that an inexpensive franchise business for the production of goods may require much more investment than trade or services with a large lump sum, since it requires additional investments.
- When choosing a specific product or service, research the competition in your area. If it is high, even the most reliable franchise may not be a profitable investment.
- Select several offers in your area and compare the conditions.
- Study the history of each company and personally visit existing representative offices in your and neighboring regions. If the company is very young (it must be at least 5 years old) and does not have its own divisions, most likely you have an unreliable partner.
- Analyze reviews of customers who buy goods or services produced by selected franchises. The product or service must be real and in demand on the market.
- Negotiate with entrepreneurs from neighboring regions (to avoid conflicts of interest, it is better not to contact representatives in your region) operating under this franchise. Find out the advantages and disadvantages of the business.
- Assess the level of investment in own business. If you are offered to start a business under a free franchise, in most cases this is a standard offer to supply goods for sale.
Step 2. Conclusion of an agreement with the franchisor
After the initial selection of proposals, before concluding an agreement, you need to study the features of the transaction in more detail. To do this, you need to hold a preliminary meeting with representatives of the franchisor company and receive legal advice under the proposed agreement.
How to conduct preliminary negotiations
The first meeting with the franchisor is usually held in the office or in a coworking center if the company does not have a representative office in your region. If you are invited to a cafe, most likely you are dealing with a fictitious or unprofitable franchise. An exception may be when the meeting is scheduled at a cafe whose franchise you are purchasing.
If you are a new entrepreneur, if possible, bring an experienced business consultant with you to the meeting. You should ask the franchisor for the following points:
- Availability and timing of copyright registration for a trademark. There are often cases when the franchisor sells the rights to a brand that is not registered or the ownership rights expire before the end of the contract with the franchisee.
- Amount and payment schedule. You must be provided detailed information on lump sum fees and royalties in national currency. If amounts are given in convertible currencies, the exchange rate must be specified. Royalties can be a fixed amount or expressed as a percentage. Sometimes royalties are tied to the volume of the enterprise (for example, to the area of the sales floor).
- Organizational expenses. To attract franchisees, many companies make a minimal lump sum contribution or do not include it at all in the contract. On the other hand, it very often turns out that in this case the franchisees are charged with the costs of creating design projects for outlets (stores, offices), training staff, and obtaining permits.
- Choosing a business location. When going to a meeting with a franchisor, you can pre-select several locations where you would like to locate your business, but your future partner may also offer you cost-effective options, which you cannot refuse if a deal is concluded.
- Support level. Ideally, the franchisor should provide you with comprehensive assistance and advice until the business reaches the desired level. But many companies provide virtually no support during the formation of a business, which can be a decisive factor for beginners.
- Level of control. You need to know how strict the rules are for the franchise you are interested in, and also determine the boundaries of making your own decisions (what you can change and what you cannot). This applies to the procurement of equipment, raw materials, goods, as well as pricing and overall strategy.
Franchise business is becoming more and more relevant, and for good reason. It is noteworthy that this option is chosen by both beginners and experienced entrepreneurs, and this is logical. The former do not want to bother with the development of advertising materials, organizational and documentary details, and the latter, in turn, have already made their mark in previous types of activities and understand perfectly well that it is better to invest their money in a proven business scheme that has been successfully operating for many years in a row.
There are a lot of offers on the franchise market today, and at the moment There are several hundred of them in Russia. It is only important to study very carefully what interests you most, since there are also little-known and sometimes simply absurd ones.
Moreover, we are talking about Moscow, where there is a lot of competition and, perhaps, branches under a certain brand have already been opened. However, sometimes franchisors allow this type of business, because it is profitable for them to expand it.
How to choose a suitable franchise for Moscow?
Ideally, if you are already familiar with a specific type of business and know well all its pros and cons. If practical experience no, then you need to study as much information as possible about the franchisor. For example, to start, visit the office (store) of a company under the guise of a client, and see how it all looks in reality. You may be able to talk to franchisees who are already working under this brand. Read reviews about the franchise, find out how many branches are open for it. As a rule, under the name of developed and successful companies dozens, or even hundreds of franchisees work, because profitable business stable and worked out to the smallest detail.
In the end, think about what exactly you like, and in the most free form. Do you like coffee or sweets? Then you will be able to open a cafe or coffee shop with great success and pleasure. Do you like to draw or are you interested? Today there are more than enough franchises in these niches.
In the case of Moscow, choosing a franchise is generally very easy, because here there are both elite areas with wealthy residents and peripheral places where budget goods and services will be in better demand among the local population.
Essentially, any type of business can be franchised, and this is often one of the goals of any experienced entrepreneur. Expanding your business while receiving a good percentage and greater recognition is the best result for many businessmen.
Money to open a business in Moscow
Naturally, the choice is also influenced by the size of the budget that the entrepreneur has. It’s good if you have several million rubles in stock and you’re not afraid to lose them, but what should those who don’t have decent starting capital do? Fortunately, today there are several options for starting a business in Moscow in this regard. In particular, you can attract money from outside, for example, in the form of a subsidy or grant for business development. Credit can also be called additional opportunity, but here it is worth approaching the issue very wisely, because in this case the entrepreneur risks not only going broke, but also being left with large debts. In Moscow today there are various business incubators and assistance centers for budding entrepreneurs. Of course, in the Russian capital there are also a lot of private investors who may be interested in a specific direction. It all depends on the profitability of the business and how the entrepreneur will present it to a potential investor.
Advantages of a franchise business in Moscow
Moscow is exactly the city where people more often look at the brand than at the price. It is quite natural that there are already fans of this or that brand (company), so it is very easy to find the target audience for a franchise business here. Surely, in a certain area there are people who are forced to travel to the other end of the city in order to taste their favorite signature dish or, for example, buy clothes from their favorite brand. Naturally, they will be very happy if a company store or favorite coffee shop opens in their area. Moscow, as you know, is a very big city, so here you don’t always want to stand in traffic jams or take the metro to the desired place.
By purchasing a franchise, an entrepreneur joins trading network or becomes a representative of the company that provides him with full consulting, marketing and legal support. Equipment is provided, and sometimes assistance is provided in selecting premises and personnel.
By opening a franchise business, a person joins a business that successfully brings profit not only to the franchisor, but also to the company’s partners. Invaluable advice can be given here general issues, and if possible, you can exchange experiences with other franchisees. This is definitely better than getting into an unfamiliar type of business without any support.
When working as a franchise, an entrepreneur does not need to come up with a business idea, because everything has already been worked out and tested in practice more than once. There is a clear business strategy and you just need to invest start-up capital. Today there are many franchises that are perfect for entrepreneurs without experience in business or personnel management.
A proven way to develop a business is an opportunity to save on marketing research, market analysis and study of brand popularity. If the niche is in demand, then the profitability of the business will be obvious. Some franchisors provide truthful data about expected income and payback periods. They have no reason to deceive their franchisees, because any owner large company interested in seeing his brand develop.
It is noteworthy that representatives of the franchisor can draw up an individual business plan for a specific branch - this will clearly determine all expenses. In addition, a design project can be developed point of sale and the entire cooperation scheme in the case of a franchise is usually described in detail. This will reduce many risks, which can be very significant in any type of business.
Do not forget about the advantages of franchises in the sense that the franchisor is a reliable guarantor when receiving a loan or subsidy, because any investor or lender understands that a well-known brand is the key to stable and high income. Sometimes franchisors can officially confirm the fact of cooperation, and this is a good help in obtaining investments.
Disadvantages of a franchise business in Moscow
As sad as it may be, a franchise business also has its downsides. Moreover, if you don’t know them, you can easily “burn out” at the very early stages of work.
Probably the most significant disadvantage of any franchise is that the future of the business directly depends on the franchisor. That is, if the owner of the parent company decides to cease its activities, then the entire network will automatically be closed, regardless of the number and profitability of branches. To protect yourself from this moment, you should carefully study the terms of the franchise. In particular, some agreements directly indicate the terms of use of the franchise and talk about compensation for damages in the event that the company’s activities cease.
Do not forget about such issues as royalties and advertising fees - they are somewhat similar to loan obligations, especially since they must be fulfilled constantly and throughout the entire period of cooperation. Often these payments are a fixed amount that is paid regardless of profits, so paying royalties is not always easy. However, there are also franchises that do not imply any deductions - when buying a business, a one-time and fixed amount is paid.
The downside is also the strong dependence on the franchise owner. Obviously, there may be strict control on the part of the franchisor and the entrepreneur may sometimes feel like an employee. On the one hand, this can have a positive impact on profits, but at the same time, the franchisee will be forced to work within narrow limits, constantly reporting to the head office and unconditionally following corporate rules. In addition, dependence here also implies that the prosperity of the franchisee’s business directly depends on the demand for the brand. Consequently, if negative reviews or news about the parent company begin to appear, then a shadow will fall on all its branches, and this, again, is fraught with the loss of customers. Again, if we are talking about Moscow, then control may be stronger and attention may be greater. It is natural that all business processes here proceed much faster than in small towns.
The total investment when opening a franchise business is often greater than when starting from scratch. When buying a franchise, you will have to pay an initial fee, buy goods and various marketing materials. If you start a business on your own, these expenses may not be necessary, and in general you can save a lot, because in this case you have complete freedom of choice.
What is important to remember when opening a franchise business in Moscow?
Based on the above, we can make a fair conclusion that for a franchise it is better to choose the business that best meets the individual criteria of the entrepreneur. As we said at the very beginning, today in Russia, as well as in Moscow, hundreds of franchises operate successfully, so it is difficult to give recommendations about which one is best to choose. You should start, at a minimum, from the financial capabilities and conditions offered by the franchisor. All the nuances of such cooperation should be studied very carefully, and only then can we say that this partnership will be more likely to be successful.
Franchising differs from other ways of doing business in that 90 out of 100 franchised businesses not only survive for more than one year, but also operate at a profit. By comparison, only 15 out of 100 innovation-related startups make it to the end of their first year. Although 7 of them subsequently achieve crazy profits, the probability of ruin is 85%. Opening a franchise business means acting reliably - the enterprise will bring not fantastic, but good profits, and guarantee financial stability.
Where to look for franchise offers
In which area to open your own business?
One of the trends in the franchising market in recent years is an increase in offers Russian companies.
Franchises of cafes and restaurants, especially enterprises, remain the most popular options fast food.
The second place is occupied by franchises of goods and services for children. The number of offers in the sports, beauty and health categories increased by a third.
A proven option is to open a medical laboratory where you can quickly get tested.
A little less attention to options in the field retail food and household goods.
Important to know! Clothing, footwear and jewelry franchises have lost ground over the past year - the growth of enterprises in these segments decreased by 45%.
Assessing supply and demand in the selected niche
Before you open a business, it is important to decide where your enterprise will operate. Big city or small? Rate purchasing power population - if people earn little, they will not be able to afford an expensive boutique or an elite restaurant. Determine the size of your target audience. If the number potential clients less than 2% of the number of people living near the enterprise, the profitability of the business is in danger.
Risky venture - opening in small town a business that requires highly qualified specialists. As a rule, they quickly leave for big cities. In a small town, you need to carefully monitor your reputation because information spreads quickly.
Mining gold from sand at home: technology, subtleties and business risks
On the other hand, a big city means expensive rent, high salaries, fierce competition, including for promising premises, and additional advertising costs. Without huge investments, it is impossible to obtain exclusive rights and defeat competitors.
What business is better to open in a small town:
- economy class hairdresser;
- sushi shop;
- children's development center;
- casual inexpensive clothing store.
How much does it cost to open a franchise business: financial assessment
The amount of starting investment is the cost of rent, design project, renovation of premises, purchase of equipment and/or products, personnel training, marketing. When purchasing a franchise, these costs will be halved. The franchising program, as a rule, includes: a design project for the premises, employee training, a brand book with layouts of advertising materials and much more. For this support, the future partner must pay a lump sum fee - a one-time payment for the right to work under the franchise. It amounts to up to 10% of the cost of starting a business. There are programs without a lump sum payment, when the starting payment, as a rule, is included in the mandatory purchase of a minimum batch of goods or equipment.
Franchising also includes operational support for the partner from the program owner - expenses for brand advertising, research, regular consultations, and assessment of the enterprise’s effectiveness. For support, the franchisee pays a royalty - a payment every month in the form of a certain amount or percentage of turnover/profit. As with a lump sum fee, royalties can be in the form of monthly product purchases or advertising royalties.
- inexpensive sweet fast food (waffles), take-out coffee shop;
- legal advice;
- advertising services;
- business to business, for example, certification services;
- travel agency;
- sale of plastic cards.
Proposal analysis and negotiations
Important! If there is no franchise offer on the company's official website, it does not exist. The company develops the network independently.
Franchises you shouldn't mess with:
- Fakes. Fraudsters copy elements of a well-known brand and create a similar offer. A naive entrepreneur enters into a deal with the intention of opening a franchise business. Not only does a fake have nothing to do with famous brand, its real owner can sue the franchisee.
Examples of such franchises: ZaraZara, Eurosvyaz, etc. - Ephemera. An offer, very tempting on paper, is created with one purpose - to sell it and disappear into the distance. To avoid falling for the trick, look at the creation date of the franchisor company and the start date of franchise sales. If the company and trademark were registered almost yesterday, refuse.
- Not ready-made franchises . This is an offer from a young company that does business honestly, but does not yet have experience, proven business processes and normal support. The company itself may soon go out of business, and with it the franchising program.
Important tip! Do not use the franchisee business plan that the brand owner created.
In the USA, by the way, it is prohibited by law to guarantee specific income to a franchise partner.
It is useful for a future franchisee to research the market and make calculations himself. Often the goal of a company's franchising division is to sell more offerings, and profitability figures may be overly optimistic. Do not take the franchisor's promises for granted - check the information.
What animals are most profitable to breed at home?
A future partner should communicate not only with company employees, but with other franchisees. It would be a good idea to come to the site and see how the enterprise operates. Reviews from franchisees - current and former - will help you make the right decision. If the owner hides the contacts and location of his franchisees, opening a partnership business with him is a bad idea.
Signing an agreement with the brand owner
When an entrepreneur is ready to buy a franchise and open a business, the parties enter into an agreement. There is no franchising agreement in the legislation of the Russian Federation; cooperation should be regulated by a commercial concession agreement. According to statistics, only a fifth of all franchisors offer such an agreement to partners. However, if you are given the opportunity to sign a delivery agreement or information services- this is a reason to doubt whether the relationship between the parties is franchising.
Based on a commercial concession agreement (CC), the franchisor transfers intellectual property (brand, trademark, technology) to the partner under certain conditions, without worrying about its safety. The CC agreement, in turn, secures the franchisee’s right to receive benefits from cooperation, while the supply agreement does not guarantee the privilege of using the brand.
The future partner needs to check the registration of the franchisor's trademark with Rospatent. The document specifies the rights and obligations of the parties and payment terms. A deferred payment may be granted for the payment of the lump sum contribution. Check the validity period of the contract. For example, Subway enters into a QC agreement for 20 years. But most owners prefer a period of 3 years. That is, by the time the franchisee begins to receive the greatest profit, the agreement will come to an end.
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