essence of franchising

Franchising is a special kind of economic relations in which one party (the franchisor) transfers to another (the franchisee) for a fee (royalty) the right to a certain type of business.In particular, the franchisee receives the right to operate under the franchisor's trademarks and to use the waste business model.

Despite the fact that while the number of firms operating on the franchising in Russia is relatively small, this business is becoming increasingly popular.The reasons for this trend somewhat.

advantages of buying a franchise is the ability to use a tried and tested business model of the organization over the years, which has proven to be cost effective.The franchisor can help with the difficulties encountered in the conduct of business, in particular, form th
e optimal range, provide a balanced system of logistics and so on. In this case, the franchisee has the economic and legal independence.

opening a business franchise, entrepreneur already has a pool of loyal brand customers, thereby reducing the marketing costs of the company.

entrepreneur is easier to plan their business, because it can get from the franchisor amount of investment costs, as well as a detailed business plan.

How to choose a franchise

Before you decide to purchase a franchise, you must carefully analyze the commercial offer of the franchisor.Open access presents a huge number of proposals for opening a business franchise.It is necessary to initially determine the desired direction of work (trade, restaurant business, and so on.), And then choose from the represented companies based on their investment opportunities.

Further analysis should be based on assessment of the market potential of a business idea in the region, as well as directly to the franchisor.The first stage is to consider the prospects for the idea on the basis of population, the competitive environment, as well as availability of adequate retail space.It claimed the franchisor rates of return and payback of business may be relevant only in relation to major metropolitan areas, and in a small town such a business can not be a success.

rank franchisor should be comprehensive, based on a number of criteria:

- experience of the company in the market;
- the number of enterprises operating under franchise, their financial performance, the dynamics of the opening and closing;
- the existence of a registered trademark;
- conditions out of business;
- requirements for suppliers of materials and equipment - many unscrupulous companies seek to make money on this, offering obviously unprofitable, onerous conditions for the franchisee;
- what support is provided by the franchisor.

Finally, it is to assess the overall impression of the communication with the franchisor.

desirable to also contact already working on this franchise companies to identify potential pitfalls associated with the conduct of business and the complexity arising from them.

What is included in the value of the franchise

cost franchise is made up of several components.As a rule, the contract provides for a one-time fee for the right to use the trademark.He also called lump-sum payment.

Also in the contract can be subscribed the amount of royalties for the use of the franchise (fixed, one-time or a percentage of sales).These payments are called royalties and are a kind of rent for the brand.However, this requirement may be replaced by regulated amount of monthly purchases from the franchisor.

Some franchises also provide monthly or annual payments to the marketing fund.

In addition to these payments an entrepreneur also has all of the standard cost - rental payments, repair facilities, purchase of equipment, staff salaries, etc..