When the person makes the decision to start own business, before it there is a choice as it is better to organize it for fast payback and receiving profit. One of the popular directions in business is franchizing when the businessman receives a popular brand in the order.
Franchize – that it?
In the world there are many famous brands which make huge profit for the owners. For them one more option of earnings is sale of a franchize which represents a form of the agreement between the beginning businessman (franchisee) and trade group (franchayzor) on use of a trademark for own commercial purposes. The franchize is a fast way of promotion of own business. Trademarks, technologies, intellectual property, privileges and the rights can act as subject to transfer.
What enters a franchize?
To understand what it is possible to count upon purchase of a popular brand on, it is necessary to consider many details. Refer consideration of the provided franchasing package to indispensable conditions, that is it is important to understand what will be received at implementation of the transaction on purchase. Each owner of large business can make changes to it. The main being franchizes following:
- Trademark (brand). The businessman receives the untwisted trademark which is registered in Patent office and has the certificate of protection, that is it is protected by the law.
- Know-how. Knowledge and experience of the owner of business which are used for production of a product and are confidential.
- Operational management. Detailed description of rules of business and protection of the concept of business.
- Services of the franchiser. The range of the provided services can differ depending on business type, and it includes: intensive program of training, help in the choice of the room, order of the equipment and products, staff recruitment, advertizing and providing software. After start of a point also operational support is carried out.
- The income of the franchiser means a lump-sum contribution, a royalty and payment for joint marketing fund.
What is the royalty in a franchize?
Upon purchase of a brand of the franchisee will have to make certain financial investments. Some types of payment are monthly. If the franchize is bought, the royalty will represent the regular payments deducted to the owner for use of a logo, trademark and other attributes. Each franchayzor determines the sum and the scheme of payments independently. The payment in the form of percent from the total amount of realization or percent from a turn is more often used.
Franchize – pluses and minuses
That each beginning businessman could be defined whether it is necessary to make the transaction, it is important to estimate advantages and shortcomings. Let's begin with pluses to which refer receiving a recognizable brand and high speed of promotion. Refer training, support of branch and the minimum publicity expenses to important advantages. It should be noted small risk for business, so according to the statistics of 80% of such enterprises successfully pass a five-year boundary.
There are also franchize minuses which cannot be missed from attention. A shortcoming is the lack of an opportunity to bring the ideas as there are strict restrictions stated in the contract. The franchisee has to buy the equipment and consumables only from the business partner, without having an opportunity to choose. Continuing to find out, a franchize – what is it, it is necessary to specify one more minus – pressure from the owner. It is important to note the high cost of some brands.
How to create a franchize?
When business develops and extends, sooner or later owners think of creation of own franchize as it is one of ways to get good profit. For a start it is necessary to solve for what purpose everything becomes, for example, if the company small, then it is necessary to provide minimum a royalty and a lump-sum contribution and when the purpose is to develop quickly, then the contribution small has to be a royalty high, and. To understand how to make a franchize, it is necessary to consider important rules.
- Offer the concept of a franchize which includes the financial plan, cost, types of payment, a payback period, the sum of investments and the provided services.
- Prepare documents: concept, cost, financial plan, presentation and contract. It is necessary to be engaged also in internal documentation, for example, in duty regulations, scripts and so on.
- Think over options of sales, that is as you will attract clients and how many they will cost.
- It is necessary to register the trademark and a logo.
How to choose a franchize?
At once It is necessary to tell that there is no way which would allow to define in advance what business will pay off, and will make profit as everything depends on how the businessman will develop the child. For the correct understanding, what is it a franchize, it is necessary to understand rules of its choice as it is a serious step. That purchase was successful, important to estimate several important factors.
- Own opportunities. It is important to understand what means the businessman for an investment in business owns. Still it is necessary to solve who will be engaged in management and whether requirements of the franchiser are acceptable.
- Market trends. Profitable franchizes have to be organized in the suitable place. It is necessary to consider population, interest of potential buyers, the competition and existence of trading floors.
- Assessment of the franchiser. Carefully analyze activity of the chosen brand, for example, how many years work the company how many it is already sold franchizes and whether there were they successful. At the representative of a franchayzor it is necessary to specify all questions.
- System assessment. As there is already an understanding concerning that, a franchize – what is it, it is necessary to estimate the offered system by the main criteria: solution of legal issues, scheme of support and payments, requirements to the equipment of a privilege, communication and so on.
Types of a franchize
The type of opening and development of business due to purchase of the untwisted trademark is popular that led to formation of several different types of such forms of government. There are different directions, but it is possible to distinguish several main categories of business relations in this area which are used worldwide from them. Main types of franchizes following:
- Classical. Means existence of a royalty and lump-sum contribution, registration for the right to use the brand, strict network requirements and the periodic reporting.
- Silver. Franchayzor creates turnkey business, and then, transfers assets to the buyer of a franchize, counting on receiving percent from revenue.
- Free. For those whom interests, a franchize – what is it it is important to know about this popular type of business as the franchisee can independently conduct business activity. Still he uses the trademark, free of charge studies and consults at the owner and uses different privileges. Initial contribution small, a royalty is present.
- Gold. The buyer has an opportunity not only to open the enterprises, but also most to sell franchizes.
- Rent. This type is similar to a silver franchize, but the difference is that the property rights remain with a franchayzor.
Unconditional franchize
When the insurer pays a difference between the actual amount of damage and the established maximum value, it is an unconditional franchize. Its cost is subtracted from the amount of insurance compensation. It received the greatest distribution at car insurance and property insurance. It can be determined in monetary and percentage value when the insurer pays only a part from the loss sum.
Conditional franchize
When the client independently undertakes the obligation to compensate the losses exceeding the sum determined by a franchize, it is a conditional franchize. When the amount of damage is more than specified sum, compensation happens in 100% size. More often this option is used at personal insurance and then the number of days of a disease for which it is possible to receive compensation by all means makes a reservation.
Franchizes for small business
For representatives of small business the choice of a kind of activity is broad and to define the niche it is necessary to consider what goods or services are not enough in the region, than there is a wish to be engaged and what activity is priority according to the state program. Interesting franchizes can be picked up in such spheres: production and trade in products and building materials, organization of tourism, IT-technology, transport services and so on.
Franchize without investments
Such option of development of business is favorable to both parties, so the franchayzor receives additional dividends, and the franchisee receives turnkey business. The franchize without investments under realization begins as representation in regions, and then, in a couple of years the franchisee enters the legitimate rights. He represents not only an intellectual loan of the idea of business, but also material credibility.
Cheap franchizes
Practically in each sphere of the organization of business there is an opportunity to get a ready trademark. It is possible to distinguish brands, the required small initial expenses and having a small payback period from them. Among fast food as an example it is possible to cite Crumb potato and Vilka-Lozhka, and as for delivery of food, WokBox is popular. Among trademarks there are favorable franchizes: Jeans. Superprice and Magic book.
Popular franchizes
In the world there is a huge number of commodity brands which are engaged in sale of franchizes. Use them on different conditions and in different spheres, but according to popularity it is possible to define the best franchizes. In the sphere of a public catering the rating heads McDonald’s, but the company issues franchizes not to all and requirements huge (a lump-sum contribution – $45 thousand, a royalty – 12.5% a month of a turn). In the sphere of trade ZARA is popular and the company demands to conduct on opening of shop procurement for a certain sum (the cost of a franchize and the price of the first purchase – there are $ no 30 thousand, a royalty –).