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What is franchising. What is franchising and what are the benefits of a franchise

Franchising- the relationship between two market participants in the field of business at the conclusion of the contract. One party transfers to another participant the right to a type of activity with a developed project for payment.

Description in simple words

Information from Wikipedia

The origin of franchising

The concept of "franchising" originated in the twentieth century in the United States. Its initial function is to increase the sale of its goods. Later, franchising was used by independent wholesalers and retailers to increase and remain competitive in the market.

In the 1930s, oil companies began to use the franchise system to open car filling stations. Organizations that received a license sold the goods and services of the franchisor in a short time. This allowed large companies to stay afloat during the crisis in America.

In the middle of the century, franchising received rapid development under the policy of non-intervention of the authorities. The McDonald's brothers were among the first to achieve success.

Franchisor and Franchisee

Franchising is a kind of renting a brand or commercial designation. governed by an agreement between the recipient and the party providing the good or service.

A large enterprise concludes an agreement with small entrepreneurs on granting it the right to produce goods and sell them under the brand name of a well-known company.

Franchisor- an organization that has issued a license or rights to use its brand or technology.

Relationship model

The franchisor enters into agreements with several organizations and creates an extensive network of commercial enterprises under one brand. Small entrepreneurs are dependent on the parent company. This is confirmed by the contract. Obligations - compliance with all rules established by the franchisor.

The duties of the parent organization include the provision of services for the supply of equipment, raw materials, technologies, staff training and accounting.

Relationships under a franchise agreement can be beneficial for participants: the franchisee is interested in high sales at the lowest cost. The parent company is in the market leadership, which is difficult to do alone.

A small entrepreneur is obliged to comply with the rules of doing business, to participate in campaigns related to advertising and marketing conducted by the franchisor. The franchisee may provide financial loans to the franchisee if needed.

Types of franchising

The classic look - there are royalties, a lump-sum fee (a single payment when buying a brand), registration for the rights to use the brand, strict requirements of the franchisor and reporting to him.
A silver franchise is a transfer of a regulated business. The franchisor is engaged in the construction or rental of premises with the condition of receiving a constant percentage of the profits of the entrepreneur.
Free view - use of the company's brand, free training for the entrepreneur's employees, special prices for the supply of goods and other benefits. The price of a franchise is higher than its other types.
Golden Franchise - The exclusive right to operate a franchise in a region or country. There is a possibility of sub-franchising: an entrepreneur can provide a franchise himself.
Lease - ownership of the business remains with the parent company.

A franchise is widespread in the form of issuing a license to national entrepreneurs by foreign companies - attracting investments from abroad to the country. The franchise is beneficial for stabilization, development of the economy and gives the following effects:

entrepreneurs who have received a license are entitled to use the proven business methods of the licensor;
the organization that issued the license lays the foundation for its activities on the territory of the country and region;
consumers continue to use proven products and services.

Advantages and disadvantages

There are often stringent requirements for the franchise buyer to exit the business. In some cases - a ban on competitive activities for several years in a certain territory.

Depending on the type of franchise, contract buyers may be required to pay for advertising and marketing campaigns. At the same time, they are not provided with reports on the funds spent. That is, the entrepreneur's money may not be used in the best way.

Running a franchise business has the following benefits:

the possibility of expanding the company in the market;
strengthening reputation;
more information about the product by opening new outlets.

For the franchisor, selling a franchise gives a stable volume of sales from products or services, since entrepreneurs are obliged to buy out batches of products under the contract. If the income is stable, then the company plans and develops new directions.

The franchisor, before opening a franchise, must be confident in the effectiveness of his business, so that the entrepreneur, when buying a franchise, knows that the business model will not bring a loss. The franchisee with the purchase of the contract gains the following advantages:

easy opening of your own project, the entrepreneur will retain independence in economic and legal terms;
a wide choice of industry - a potential entrepreneur can learn about the franchisor's business (commercial offer) before investing;
reduction of potential risks - the organization for the exhausted franchise becomes part of the parent company, the franchisor helps the entrepreneur in case of problems;
trouble-free entry to the market - a well-known brand that has proven itself is uninterruptedly acquired by customers;
low advertising costs;
uninterrupted supply of products.

Source of profit

The company that has implemented the franchise receives income from various sources:

franchisee fees;
payments or share of sales;
margin on materials and supplied goods;
wholesale discounts;
leasing premises to franchisees;
interest on a loan granted to an entrepreneur;
fees for advertising and marketing from the franchisee;
own trading companies.

The legislative framework

In the legislation of the Russian Federation, franchising is regulated by the Civil Code of the Russian Federation Chapter 54 "Commercial Concession". The term "franchise" is not used.

Article 1027 of the Civil Code of the Russian Federation defines the content. The copyright holder company provides the buyer with the use of a set of exclusive rights in its activities to the extent specified in the agreement.

Franchising is a progressive form of activity for small entrepreneurs and large companies. The franchise agreement is an independent object of regulation at the legislative level in more than 80 countries.

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 franchisee , 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 franchisee 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 and so on.);
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:

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.
An established brand. Brand recognition is already there, it makes no sense to spend money on advertising.
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.
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.
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:

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.
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.
High transaction cost. Famous brands charge a lot for their trademark and business model, especially for a master franchise.
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.
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:

"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.
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.
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" V 2011 And 2013 years.
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.
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:

sphere of media business;
organization of public catering;
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:

rent and repair of premises;
payment of wages;
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.

In a general sense, franchising is the "leasing" of a trademark or commercial designation. The use of a franchise is governed by an agreement between the franchisor (the one who grants the franchise) and the franchisee (the one who receives it). The content of the agreement can be different, from simple to very complex, containing the smallest details of the use of a trademark. As a rule, the contract regulates the amount of deductions for the use of the franchise (it can be fixed, one-time for a certain period, which is a percentage of sales). There may be no requirement for deductions, but in this case, the franchisee undertakes to buy a certain amount of goods/works/services from the franchisor.

Conditions for the use of a trademark/brand may serve as a separate clause of the contracts. These requirements can be very simple (for example, the franchisee has the right to use the brand in a particular industry) or rigid (for example, the franchisee undertakes to use the equipment in the store in strict accordance with the requirements of the franchisor - from the size and color of the shelves to the staff uniform).

the franchisor receives royalties for the use of his trademark;
the franchisee pays an initial fee for the right to become part of the system;
The franchisor provides the franchisee with a business system.

The history of franchising

The prototype of the modern franchising system is considered to be the Singer sewing machine sales and service system. The founder of the world famous Singer Sewing machine company, Isaac Singer, became the founder of modern franchising. Beginning in 1851, the Singer firm entered into a written franchise agreement with distributors of goods, the agreement transferred the right to sell and repair sewing machines in a certain territory of the United States.

At the time of the organization of the world's first full-fledged franchise system, Singer's company ensured the mass production of sewing machines, which allows maintaining the most competitive prices, but at the same time did not have an established service system that would allow organizing maintenance and repair of machines throughout the United States. In this regard, a franchise system was created, which provided financially independent firms with exclusive rights to sell and service sewing machines in a certain territory. These early franchises were, at their core, operating distribution agreements with the additional obligation of the franchisee (dealer) to service the machines.

Modern franchising experienced a real upsurge when General Motors began to use franchised dealerships.

Classical commodity franchising, which distributes goods and services in the franchisor - franchisor system, began to change only in the 50s of the last century.

In Russia, franchising is beginning to become widespread only in recent years. In particular, most of the Pyaterochka grocery discounter chain, part of the Euroset communication stores, the 2GIS electronic reference card, 1C company operate under the franchise scheme.

Franchising under Russian law: commercial concession agreement

In Russian law, franchising relations are regulated commercial concession agreement.

Under a commercial concession agreement, one party (right holder) undertakes to grant the other party (user) for a fee for a period or without specifying a period of time the right to use in the user's business activities a set of exclusive rights belonging to the copyright holder, including the right to a trademark, service mark, as well as rights to other objects of exclusive rights provided for by the agreement, in particular for a commercial designation, a secret of production (know-how).

A commercial concession agreement provides for the use of a set of exclusive rights, business reputation and commercial experience of the right holder in a certain amount (in particular, with the establishment of a minimum and (or) maximum amount of use), with or without indicating the territory of use in relation to a certain area of business activity (sale of goods received from the copyright holder or produced by the user, other trading activities, performance of work, provision of services).

Parties under a commercial concession agreement may be commercial organizations and citizens registered as individual entrepreneurs.

Benefits of franchising

Benefits for the franchisor

For the franchisor, the priority benefit of franchising lies in the fact that he receives, albeit a small, but guaranteed stable volume of sales of his products, since the franchisee is obliged to buy from him the consignments of goods, consumables or other products / services specified by the contract. If the income is stable, then it can be successfully planned for the future, which means that new directions can be developed.
With all this, the franchisor is not burdened with the difficulties associated with a number of expenses that ordinary players have - training and recruitment, quality control, etc. In addition, the development of a franchise network is an excellent brand advertisement that does not require special financial investments.

Benefits for franchisees

Using a proven business system

Before offering his franchise on the market, the franchisor must "bring to mind" his business system, work out all business processes and prove the effectiveness of his business. Moreover, for the effective development of the franchise network, the franchisor must have a flagship enterprise, on the basis of which the business is cloned. Therefore, when acquiring a franchise, an entrepreneur acquires an already proven and proven business model that has proven its effectiveness.

Opportunity to start your own business

Despite the fact that the franchisor has a certain degree of control over the franchisee, which is mainly aimed at improving the efficiency of partners by identifying possible problems of partner enterprises at the stage of their inception, the franchisee retains economic and legal independence.

Choice of industry

A potential franchisee has the opportunity to get acquainted with the franchisor's business before the stage of investing its own funds. This can be done on the basis of open information - the commercial offer of the franchisor and its operating enterprises, both own and partner.

Opportunity to reduce risks

By opening a partner enterprise, with a well-developed franchising program, the franchisee becomes part of the "family", that is, unlike the opening independent enterprise, the franchisor does not leave partners face to face with many problems and risks of a start-up business.

Successful market entry secured

One of the main requirements for a franchised business is the demand for goods or services provided by the franchisor. Therefore, by buying a successful business idea and starting its activities under an already well-known brand, the franchisee already has a circle of consumers loyal to the brand by the time they open their business.

Minimum advertising and marketing costs

Due to the fact that the franchisee begins to operate as part of a well-known network, his initial advertising costs are reduced to providing advertising for the opening of the franchise business in the local market. The same is the case with the current advertising, which is aimed at the "promotion" of the franchise network in this particular region.

Gaining access to the franchisor's knowledge base

The franchisor, providing partners with his business system, transfers not only a well-functioning mechanism, but also an “instruction” for its effective use. The franchisor teaches his partners how to effectively build a business, taking into account all its specific features.

Guaranteed Supply Chain

Since franchising, as a rule, is a priority activity for companies, and partners - franchisees - have the best conditions, the franchisor seeks to provide this area with the greatest resources, including delivery issues.

Franchising Disadvantages

Franchisees are forced to follow the rules and restrictions set by the franchisor, even if they do not bring maximum benefit to the business.
Franchisees are often required to purchase raw materials and products from suppliers designated by the franchisor, which may limit their access to the free market and force them to purchase raw materials and products at inflated prices.
Franchisees may be subject to severe restrictions on exit from the business, including a ban on opening competing organizations for a certain period or in a certain territory.
Franchisees rarely have influence over centralized marketing and advertising, but they may be forced to pay for centralized marketing and advertising campaigns. Thus, their funds may not be used in their best interests.

Notable franchise companies

There are many companies that provide turnkey business. At the same time, it should be noted that the name “franchisor company” does not mean that the company offers all its capacities for franchising, it can also have a certain number of objects in its “personal” property.

Notes

Sources

Growth strategy"

Steven Spinelli Jr., Robert M. Rosenberg, Sue Burley Franchising = Franchising: Pathway to Wealth Creation. - M .: "Williams", 2006. - S. 384. - ISBN 0-13-009717-9

Links

Civil law contracts

Transaction Invalidity of the transaction Agreement Offer Acceptance Quasi-contract

for the transfer of property
into the property

purchase and sale (retail supply supply for state and municipal needs contracting energy supply sale of real estate sale of an enterprise) exchange of donation of rent (permanent life maintenance with a dependent) privatization of housing

for the transfer of property
for use

lease (vehicles enterprise buildings and structures rental leasing) rental housing loans

for the performance of work

contract (domestic construction for the performance of design and survey work for the performance of work for state and municipal needs) participation in shared construction R&D

on the provision of services

actual	paid provision of storage services transportation (chartering) of a transport expedition trust management of property
legal	agency commission orders
financial

Franchising is a form of cooperation when a well-known brand offers a novice entrepreneur to acquire the right to use his name. The subject of sale is not only the name (trademark), but also technologies, equipment, a package of documents, and a marketing strategy. Together they make up a complete business model, which the entrepreneur has the right to use immediately after the purchase.

Important! The franchisor (the selling side) transfers the technology to the franchisee (the buying side) to get the business back on track as quickly as possible. The proposed business model is called a franchise.

Principles of franchising

Experienced businessmen know that starting a business from scratch is extremely difficult. Even with an idea, a budget, and advertising, selling a thing without a story is much harder than a Gucci scarf and Versace glasses. It takes years to develop a business; the first months you have to make financial injections without the hope of getting a return. But you have to make a living and feed your family. And then franchising comes to the aid of a novice businessman.

This is interesting! The word Franchise originally appeared in French, but it was the inhabitants of the English-speaking countries who put into it the economic meaning that it has today. Therefore, the English pronunciation of the word was fixed.

Visiting a Burger club restaurant, wearing Sali shoes, buying a can of Coca-Cola, a person is unaware that he is the object of franchising. The famous Isaac Singer is considered the first franchisor. By transferring the rights to sell and repair his sewing machines to other businessmen, he spread the prototype of modern franchising throughout the United States.

What is the difference between franchising and franchising

Pros and cons of franchising

The secret of the popularity of this type of entrepreneurship is simple: it is beneficial for both parties. The franchisor benefits from acquiring reliable business partners, controlling his trademark and generating additional income. The benefit of the franchisee is based on receiving clear and understandable instructions for starting a business and guarantees that the goods will be bought and the money spent will be returned.

System disadvantages:

dependence of the franchisee on the franchisor - in case of dishonesty of the latter, the entrepreneur will spend money and will not receive the expected effect in return
inequality of the transaction - although the nuances of cooperation are negotiated by both parties jointly, experienced lawyers of the selling party insert clauses into the contract that provide them with benefits in any case.
the complexity of conducting civilized franchising in Russian conditions - an imbalance between the standard of living in large cities and regions can lead to the fact that the idea, which went “with a bang” in Moscow, will not cause any enthusiasm in Saratov or the Far East.

An additional risk of franchising "in Russian" is the minimum participation in the transaction on the part of the state. In Western countries, franchisees receive benefits from banks and state guarantees; franchising gives them an edge. In Russia, this is a business at your own peril and risk; banks refuse soft loans, the success of the business depends on the entrepreneurial spirit and efforts of the franchisee, the honesty and conscientiousness of the franchisor.

The disadvantages of the system lead to the next question: how to minimize the threat of losing money, find a good franchisor, buy a profitable franchise.

How to write a good franchise agreement

Acquiring rights from famous brands is a win-win option, which means super income and minimal risk. But the starting capital for buying such a franchise is measured in millions of rubles. A novice businessman cannot afford this option - he is looking for a franchisor with loyal conditions for beginners. This is used by unscrupulous companies that seek to sell air under the guise of a franchise.

What to look for when drafting a contract

The subjects of the contract can only be legal entities.
It is useful to ask Rospatent if the franchisor legally owns what he sells, ask to present the relevant documents.
As in any contract, the rights and obligations of the parties, the size of the lump-sum (initial) contribution and the percentage of deductions from profits (if any) should be clearly and unambiguously prescribed.
Be sure to indicate the amount of transferred rights: what exactly the buyer pays for. Here it is important to stipulate the time of using someone else's trademark and the question of the work of competitors on their territory.
It is advisable to provide for the actions of the parties in the event of termination of the contract. Beginning businessmen often neglect this point - and make a mistake. A real businessman must foresee everything.

Important! The general rule is that all issues of future cooperation are clarified in advance and documented.

How to choose the best franchise

Although there is no official grading, franchisors are divided into those who are interested in their reputation and close cooperation, and those who want to sell more franchises and wash their hands. The first ones put forward detailed conditions and present a list of restrictions. The fact that the owner of the brand cares about how things go for the wards is a plus. But strict control is sometimes not to the liking of a free businessman. If the terms of the contract are not fulfilled, the franchisor will terminate the relationship and will not return the money.

But franchisors of the first category provide novice entrepreneurs with really working tools. By following their step-by-step instructions, even an inexperienced franchisee will set things right and get a legitimate (and most importantly, quick) profit. Such patrons not only give general recommendations, they offer to help with equipment, materials, teach, tell all the subtleties of the chosen direction literally on the fingers. They are interested in the success of the subsidiary and the latter's profit.

Many entrepreneurs who are looking for an opportunity to start a business from scratch with minimal investment have heard of a franchise. At first glance, cooperation in the franchising format seems simple. But it has its own nuances and is associated with certain risks. To really make money from a franchise, you need to familiarize yourself with how it works.

So what is a franchise in simple terms? To understand it in detail, you need to familiarize yourself with the basic concepts used in this area.

Franchise

A franchise is a type of agreement in which one company (promoted, well-known) transfers to its partner the rights to use intellectual rights or exclusive technologies. Each franchise has its own characteristics, is provided on different conditions, which is reflected in the contract.

Franchisor

This is a successful company that owns a well-known brand or technology, has a certain business reputation. It transfers the franchise to its partner on certain conditions and for a period clearly specified in the franchise agreement. Thus, the franchisor develops his business, improves it, increases brand awareness and at the same time receives payment for the use of intellectual rights.

Franchising

What is franchising? This is a business cooperation format based on a franchise. Its essence lies in the transfer of exclusive rights to intellectual property to a partner for a specific period on the terms specified in the contract.

Franchisee

An individual or legal entity can act as a franchisee, which acquires under a franchise agreement for a certain period and under certain conditions the right to use the trademark or technologies of the right holder.

Lump sum

One-time payment to the right holder for the opportunity to use a trademark, sign, technology. Is fixed, depends only on the terms of the contract, and not on the amount of benefits received in the future.

Royalty

Payment in favor of the copyright holder, which is transferred regularly throughout the term of the agreement. The amount can be fixed or calculated as a percentage of the profit received.

How does a franchise work?

Franchising is a specific business scheme. To make money on it, you need to choose a partner and sign an agreement with him. It is concluded for a certain period, after which the parties can either extend the contract or terminate it. The contract clearly specifies the rights and obligations of the parties. Compliance with the directives of the franchisor is not recommendatory, but mandatory, therefore, before signing it, you need to carefully study each item.

Such a business format as franchising implies that the right holder provides not only a business model, technologies, but also documentation, legal assistance, information and other comprehensive support.

The franchisor helps to organize a business, purchase equipment, hire staff, gives instructions for work, allocates a separate manager, whose task is to help establish the workflow.

Franchise business is beneficial for both parties. The franchisor gets the opportunity to earn more and develop the business by increasing brand awareness and making it popular. The franchisee, in turn, can use working business schemes with minimal risks, which involve small investments and guaranteed payback in the shortest possible time.

During the evolution of franchising, several types of franchises have emerged, which have their own characteristics in terms of cooperation and business. This allows a novice businessman to choose the best option for cooperation.

classical

This type of franchise has become widespread in the world. It is a classic scheme according to which the franchisee pays a lump-sum fee and royalties, and the franchisor, in turn, exercises control over the organization and conduct of business, can make adjustments in order to bring it into line with corporate norms and standards. Suitable for a beginner who is poorly versed in the peculiarities of doing business, as the risks of errors will be eliminated by the franchisor.

free

This scheme is quite popular in Russia. Its distinguishing feature is ample opportunities for franchisees. He can conduct business independently at his own discretion, with the exception of the points specified in the contract. The franchisor practically does not interfere in the activities of the partner. Therefore, the royalty payment under the agreement is also low. This type of franchise is suitable for experienced entrepreneurs who know how to run and develop a business, know its features and are confident in their abilities.

Corporate

This type of franchise is more suitable for inexperienced businessmen. Its peculiarity is that the franchisor takes care of almost all the concerns of monitoring the activities and development of the business. For beginners, this is beneficial, as there is an opportunity to learn how to work, eliminating the possibility of errors. This scheme of doing business almost completely excludes the opportunity for the franchisee to prove himself or make changes in management, which is not the main goal for newcomers at this stage.