What is franchising?

Today this term sounds more and more often both among experienced entrepreneurs, and among those who are just planning to do their own thing. Let's figure out what franchising is, what advantages it gives and what needs to be considered in this way of organizing a business.

The essence and concept

The roots of this word originate from the French franchir, which translates as "liberate" and is closely related to the granting in 1559 of rights and freedoms to bishops. Answering the question about what franchising is, it should be noted that it appeared in the Middle Ages, when the kings of Britain granted their barons the right to receive taxes from certain territories in exchange for different services. At the same time, free people could get permission to trade at the fairs and markets of the city for a fee. Special places in which they sold their goods had their own name - franchises.

In our time, in the broadest sense of the word, franchising means "renting" a commercial designation or trademark. To date, instead of inventing something new, you can simply buy a successful business and take advantage of already proven and well-proven products and services. Economists telling in their articles what franchising is, define it as a kind of entrepreneurial activity, in which the franchisor (the company-owner) transfers the franchisee (the so-called host company or an independent businessman) the right to sell their products in exchange for binding specific conditions. These include:

• Observance of specific quality characteristics;
• Use of certain technologies;
• Organization of business under a specified trademark according to the developed scheme and in a clearly specified place.

Franchising - examples of successful schemes

In Russia, this type of entrepreneurship became popular around the second half of the 90s. Until that time in our country, very few people knew what franchising is and what advantages it has. Now according to various experts' estimates, over 200 franchise companies are successfully working on the Russian market. Among them are such well-known trademarks as Xerox, Subway, Kodak, Baskin Robbins, Alphagraphics and others.

According to the rating published in the Russian edition of Forbes, the most profitable franchise of 2013 was demonstrated by the partners of Felix (manufacturing and sale of furniture). The profitability of business under this brand often reaches 40%. The second place was taken by Perekrestok-Express (a network of outlets at the house), and the third by Pozitronika (a chain of stores selling electronics).

Franchise franchises

A ready and tested business plan, almost zero risks, belonging to an advertised trading network and a ready base for starting a business - this, of course, sounds fine. But do not forget about the negative aspects. The first of these is the loss of independence: all entrepreneurial activity becomes after the conclusion of the relevant contract severely restricted by the rules of the franchisor. In addition, working with a well-known company involves substantial monthly payments, and this can inflict a painful blow to profits. The third negative point is connected with the fact that all participants of the franchise network are closely connected with each other and the error of any of them can lead to losses of the others. However, there is no such business that would guarantee 100% success. Someone is using franchising, some do not. In any case, if you meet a very profitable franchise, then why not take advantage? It's much easier than starting from scratch.