On what is franchising

Today, this term increasingly sounds like among experienced entrepreneurs, and among those who are just planning to mind his own business. Let's take a look at what franchising is, what benefits it provides and what to consider with this method of business organization.

The essence of the concept

The Roots of the word originate from the French franchir, which translates as “free” and is closely connected with the provision in 1559 the rights and freedoms of the bishops. Answering the question about what franchise, it should be noted that he appeared in the middle Ages, when the kings of Britain gave to the barons the right to obtain from certain land taxes in exchange for various services. At the same time, the free people could get for a fee, permission to trade in the fairs and markets of the city. Special places where they sold their goods and had their own name franchises.

In our time, in a broad sense, it means “rent” commercial symbols or trademarks. Today, instead of inventing something new, you can simply buy a successful business and to benefit from the already tested and proven products and services. Economists tell in their articles, what is franchising, define it as a kind of business in which the franchisor (the company owner) sends the franchisee (so-called host company or independent business) the right to sell their products in exchange for mandatory compliance with specific conditions. These include:

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• Compliance with specific quality standards;
• The use of certain technologies;
• Business organization under a specified trademark schemes and in a clearly specified location.

The Franchise – examples Successful schemes

In Russia, this kind of business became popular around the second half of 90-ies. Up to this time in our country few people knew what franchising is and what benefits it has. Now according to various experts on the Russian market, successfully operating over 200 franchise companies. Among them are such well known brands as Xerox, Subway, Kodak, Baskin Robbins, Alphagraphics and others.

According to rankings published in the Russian version of Forbes, the most profitable franchise in 2013 showed the company's partners "Felix" (manufacture and sale of furniture). The profitability of the business under this trademark often reaches 40%. Second place went to the company «Crossroads Express" (a network of retail outlets in the house), and the third “Bud” (a chain of stores selling electronics).

Cons of franchising

Ready and tested business plan, almost zero risks belonging to the trading advertised online and ready base for business start – this, of course, sounds wonderful. But do not forget and about the negative moments. The first of them – the loss of independence: all entrepreneurial activity is after the conclusion of the Treaty strictly limited by the rules of the franchisor. In addition, work with a reputable company involves substantial monthly payments, and it can inflict a painful blow to profits. The third negative point is the fact that all members of the franchising network are closely related to each other and the error of any of them may lead to losses of the others. However, there is no business that would be guaranteed 100% success. Someone franchise suits someone – no. In any case, if you are very profitable franchise, then why not use it? It's much easier than starting from scratch.