About what is franchising

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Today, this term is heard more and more often among both experienced entrepreneurs and those who are just planning to start their own business. Let's see what franchising is, what advantages it gives and what you need to consider when organizing a business in this way.

Essence and concept

The roots of this word originate from the French franchir, which translates as "liberate" and is closely related to the granting of rights and freedoms to bishops in 1559. Answering the question of what franchising is, it should be noted that it appeared 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 obtain, for a fee, permission to trade in the fairs and markets of the city. The special places where they sold their goods had their own name - franchises.

Today, in the broadest sense of the word, franchising means "renting" a commercial name or trademark. On theToday, instead of inventing something new, you can simply buy a successful business and enjoy the benefits of already proven and well-proven products and services. Economists who explain what franchising is in their articles define it as a type of entrepreneurial activity in which the franchisor (owning company) transfers to the franchisee (as the host company or independent businessman is called) the right to sell its products in exchange for the obligatory fulfillment of specific conditions. These include:

• observance of specific quality characteristics;
• use of certain technologies;
• organizing a business under a specified trademark in a well-designed scheme and in a clearly defined place.

Franchising - examples of successful schemes

In Russia, this type of entrepreneurship became popular around the second half of the 90s. Until that time, few people in our country knew what franchising is and what advantages it has. Now, according to various expert estimates, over 200 franchise companies are successfully operating on 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 in 2013 was demonstrated by the partners of the Felix company (manufacturing and selling furniture). The profitability of business under this brand often reaches 40%. Won second placethe Perekrestok-Express company (a chain of outlets near the house), and the third is Positronics (a chain of stores selling electronics).

Disadvantages of franchising

A ready-made and proven business plan, almost zero risks, belonging to an advertised trading network and a ready-made base for starting a business - this, of course, sounds great. But do not forget about the negative aspects. The first of them is the loss of independence: after the conclusion of the relevant agreement, all entrepreneurial activity becomes strictly limited by the rules of the franchisor. In addition, working with a well-known company involves significant monthly payments, and this can be a painful blow to profits. The third negative point is related to the fact 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 others. However, there is no business that would guarantee 100% success. Some people like franchising, some don't. In any case, if you meet a very profitable franchise, then why not take advantage of it? It's a lot easier than starting from scratch.