Today, this term more and more often sounds both among experienced entrepreneurs, and among those who are just planning to do their own thing. Let's see what franchising is, what advantages it gives and what needs to be taken into account in this way of organizing a business.
Essence and concept
The roots of this word originate from the French franchir, which translates as “liberate” and is closely related to the provision in 1559 of the rights and freedoms to bishops. Answering the question of what franchising is, it should be noted that it appeared back in the Middle Ages, when the kings of Britain granted their barons the right to receive taxes from certain territories in exchange for various services. At the same time, free people could get permission to trade at fairs and city markets for a fee. Special places in which they sold their goods had their own name - franchises.
Nowadays, in the broad sense of the word, franchising means “renting” a commercial designation or
trademark. Today, instead of inventing something new, you can simply buy a successful business and take advantage of the already proven and well-established products and services. Economists who describe in their articles what franchising is, define it as a type of entrepreneurial activity in which the franchisor (owner company) transfers the franchisee (the so-called host company or independent businessman) the right to sell their products in exchange for the mandatory fulfillment of specific conditions. These include:
- compliance with specific quality characteristics;
- the use of certain technologies;
- business organization under the agreed trademark according to the developed scheme and in a clearly indicated place.
Franchising - Examples of Successful Schemes
In Russia, this type of entrepreneurship became popular around the second half of the 90s. Until this time, few people in our country knew what franchising is and what advantages it has. Now, according to various expert estimates, more than 200 franchising companies are successfully operating in the Russian market. Among them are such well-recognized brands as Xerox, Subway, Kodak, Baskin Robbins, Alphagraphics and others.
According to the rating published in the Russian version of Forbes, the most profitable franchising of 2013 was demonstrated by partners of the Felix company (manufacturing and selling furniture). Profitability of a business under this
brand often reaches 40%. The second place was taken by the Perekrestok-Express company (a network of retail outlets at home), and the third - Pozitronika (a network of stores selling electronics).
Cons of Franchising
A ready and tested business plan, almost zero risks, belonging to an advertised distribution network and a ready base for starting a business - this, of course, sounds great. But do not forget about the negative points. The first of these is the loss of independence: all entrepreneurial activity becomes, after the conclusion of the corresponding contract, strictly limited by the rules of the franchisor. In addition, working with a well-known company involves significant monthly payments, and this can cause a painful blow to profits. The third negative point is that all participants in the franchise network are closely related to each other and the mistake of any of them can lead to losses for the rest. However, there is no business that would guarantee 100% success. Franchising is suitable for some, but not for others. In any case, if you meet a very profitable franchise, then why not take advantage? This is much easier than starting from scratch.