Start a Profitable Franchise Business!

Franchising is a system of business organization. In the process of working on a franchise, one of the parties transfers to another company the rights to conduct business under its own brand using the established system.

This implies the sale of goods and services in a similar way under the name of a well-known brand, using its support mechanisms and marketing technologies. Companies operating under a franchise, in turn, undertake to comply with predetermined conditions.

Activities

Obtaining such rights involves the provision of a down payment or the initial purchase of goods sold by the enterprise, followed by the treatment of monthly installments or monthly purchases.

There are several types of franchise:

• Commodity;
• production;
• Service;
• conversion;
• Business format;
• Corporate.

All these franchises have their own characteristics that predetermine the format of doing business:

1. A commodity franchise involves the transfer of rights to sell the goods produced under its own brand with the implementation of subsequent after-sales service.
2. A production franchise allows you to obtain the right to use unique patented technologies with the obligatory purchase from this company of the raw materials necessary for the manufacture of unique products.
3. A service franchise involves the granting of rights to a certain company to provide services under the name of a well-known brand.
4. The business format of a franchise involves the transfer of rights to use a trademark, image, competitive advantages and other subtleties of doing business. In this case, full and versatile support of the company is provided.
5. In a conversion-type franchise, it is assumed that an already functioning enterprise is attached to a well-known brand, which is granted the right to use a trademark. Companies granting such rights gain control of the established enterprise and may not have to worry about opening a subsidiary.
6. To work under a corporate franchise means to develop a network of enterprises, hiring many managers, but only two persons appear in the contract.

Features of the regulation

Franchise companies must comply with strict regulations approved by federal law. The main provision that obliges to comply with this regulation is the law on trademark rights. These can be exclusively commercial organizations, while private entrepreneurs are also entitled to work under a franchise.

Along with this, there is a regulation of relations that defines the obligations of the company that grants the rights to use its own trademark and the company that receives such an advantage.

The regulations oblige a company that allows you to work with a franchise:

• Transfer know-how;
• Grant a license right to use your own trademark;
• To assist in the implementation of management and sales of products.

A company that wants to run a franchise business is required by the regulations to:

1. Guarantee quality control;
2. Pay the down payment with current payments;
3. Be an active participant in training courses;
4. Conduct business using the symbols and trademarks of the donor;
5. Strictly adhere to commercial standards;
6. Inform about emerging difficulties, leave feedback on planned improvements.

There is no need to think that working on such a system brings only pluses, there are also minuses here. The regulation does not always fully reflect information about the specifics of the business, but before starting an activity, it is necessary to weigh all the pros and cons.

Advantages and disadvantages

Consider the pros and cons of franchising activities, as well as the extent to which the regulations reflect the real picture of such work. Of the positive aspects, one can single out the minimization of risks and the preservation of legal independence at the same time.

The newly formed firm does not bear the costs associated with capital investments. By franchising, the organization immediately gets the opportunity to enjoy consumer loyalty, due to brand awareness. Provides access to innovative technologies, which means that you can start a business from a prepared launch pad.

Serious support is provided from experienced partners interested in progressive and positive development. The regulations take into account all these pluses in the stipulated clauses of the contract.

However, when working on a franchise, one should not forget about the disadvantages that the regulations naturally do not stipulate. If the advantages are always in sight, then the disadvantages, as a rule, are not advertised. In fact, the work is associated with many risks, primarily expressed in the immaturity of the economic model and the formalization of processes.

Firms that allow business under their own name may be inflexible in their work, which is expressed in the neglect of the opinion of junior partners. At any time, there is the possibility of a well-known brand refusing to continue cooperation. Also, internal contradictions often arise at these enterprises that adversely affect partners. There is no way to manage the growth of the network and there is a constant risk of reorganization or liquidation of the donor.

When working with a franchise, it is necessary to take into account not only the advantages, but also the real risks.

The contract is the head of everything

Having decided for myself: “I want to work according to such a system!” - Attention should be paid to the study of the proposed contract. It is worth considering that there is no legislative right to conclude it by e-mail or fax. It must be registered in the register of the Federal Institute of Industrial Property. All this allows us to work in certain regions of Russia under a well-known trademark, which is a huge advantage.

It is necessary to evaluate all the advantages, consider reviews of such work, and only then make a decision. Such work is profitable, but it is replete with undercurrents, which it is better to know about in advance. Carefully study the terms of the contract and the information provided about the proposed business scheme in order to avoid unexpected difficulties that may be encountered due to dishonest partners.