home Calculators Is it worth starting a business with a franchise? Is a franchise profitable?

Is it worth starting a business with a franchise? Is a franchise profitable?

Ideally, the franchising system should be beneficial to all participants in this market. A franchisor is an established entrepreneur who has operational experience and has established stable relationships with suppliers of raw materials and/or components. There is a sales market and existing advertising channels. In addition, the franchise owner can offer other integral components of his business:

A unique and expensive technology, the development of which is physically inaccessible to small businesses ( typical example– mirror surfaces, analogues of similar quality simply do not exist).
Possibility to use internal tools(for example, one of the leaders in the waterless car wash industry offers users its own software using Uber technology, which simplifies the process of submitting an application for the client and receiving the order by the washer; independent development of such a tool would be very expensive).
Exclusive rights to sell certain goods (this is typical for networks selling clothing (for example), jewelry, cosmetics and other goods, the main commercial quality of which is uniqueness).

The benefits for the franchisor are quite obvious. First of all, this is the sale of his experience in the form of a French book, for which he receives quite tangible money. On average, a franchise costs the buyer (franchisee) from 500 thousand to 3 million rubles. It depends on the status of the brand, the content of the franchise and many other factors.

However, you should not overestimate the profitability of the lump-sum contribution, because a significant part of it goes to the costs of launching a partner (advertising, production of printed materials, training, consulting, design, and much more). Another thing is monthly royalties. This stable income, which gives the extensive network a significant share of the profit.

There is another significant benefit. The franchisor gets access to the market of another region at much lower costs than it would have to invest in opening its own branch. Costs for premises, equipment and personnel remain the responsibility of the franchisee. But the cost of purchasing the first batch of goods, according to the franchisor’s decision, may be included in lump sum or not. The first option, which is logical, is more profitable for the buyer.

The benefit of technology for the owner also has a downside. There are even too many franchise offers. Literally everywhere in advertising flash the happy faces of “young millionaires”, promising mountains of gold for “some” 100-200 thousand rubles in a lump sum and without royalties. In fact, such offers usually hide zilch.

Franchisor's point of view

Pavel Komarov

creator and owner of the Salt Plus network of salt caves

– In our magazine, you said that at the beginning of your work you acted largely “at random.” That is, from the very beginning you did not plan to expand your business through a franchise network?

– No, when I opened the first cave, I didn’t even think about starting a franchise. I thought that I would open 2-3 branches in my hometown, and that will be enough for me. But two years later, people from other regions began to write and call me, asking how to open the same business in their city. At first, I told everyone for free, because I understood that they were not my competitors, until a friend opened my eyes. He said that my experience and my knowledge could be packaged and distributed through franchising. This, accordingly, is what I did.

– Today, can you analyze what could be changed when starting a business to make it easier to create and promote a franchise in the future?

– The main problem I encountered was the brand and its registration. At that time, when the name, logo and design were created, I did not take into account one thing: that when registering a brand, they may coincide - in some phrases or visually - with other organizations that are already registered. Because of this, we have been registering for a year and a half. I hope that in a couple of months we will finally register.

– You have more than 40 partners in different cities of Russia. Draw a rough portrait of your franchisee. Who is he? Why did I contact you? How have you helped him develop his business?

– The portrait of our partner is a young family: husband, wife, child. When a child begins to get sick, parents are looking for a way to reduce drug treatment, sooner or later they find our service for the prevention of the body in the salt room. After completing the course, they see the result, and, accordingly, the most enterprising ones begin to learn how to open this business. We don’t have many competitors on the market, so we don’t have much choice. Everyone makes a decision according to their own pocket and out of some personal beliefs. Why do they turn to us? Probably because we are market leaders in the number of branches, we create themed salt rooms that are not the same in theme in our other branches. In addition, we work with the author of the halotherapy method, Pavel Petrovich Gorbenko, using patented equipment.

Plus constant support on all current issues. Every year we hold a gathering of franchisees, where they are trained in new techniques and technologies for promotion. The partners meet in person, after the training camp they disperse again throughout Russia, but begin to communicate online like a big family. We guide a person step by step, from scratch: opening an individual entrepreneur, choosing premises, etc. After opening, the partner is in constant contact with our management company, which helps resolve related issues, starting with the supply of consumables, related product, attracting customers to producing promotional materials and much more.

– Should an existing experienced entrepreneur buy a franchise in order to diversify his business? Say, should the owner of a large private clinic buy your franchise? Or is this primarily for inexperienced entrepreneurs?

– Of course, we have such partners. For an experienced entrepreneur, this is also an excellent way to adopt our methods and technologies that have already been proven and are producing results for their existing business. In our management company All promotion specialists have been gathered: marketer, director, targetologist, printing designer, accountant, IT department, etc. Businessman with small business economically cannot afford to maintain such a staff of highly paid employees.

– One of the main disadvantages of franchising for the franchisor is the high probability of copying the management structure. You will enter into an agreement with your partner, train him, and upon completion of the contract, he will open his own organization in the same place under a different sign. What measures do you take to protect your business from copying?

– Yes, this problem exists in the market. To prevent this from happening, you need to give your partners more value than the royalties cost them. Well, and of course, constantly improve methods and technologies. I repeat, one company cannot afford to maintain a staff of specialists who will constantly work to increase the income of each business participant. If your branches begin to close or become independent, it means you are not giving them what they need. This means your business model needs to change.

– Future franchisees are often concerned about the danger of a unilateral change in the terms of the contract by the franchisor. Most often, an increase in royalties or the introduction of some new unfavorable conditions for him. At the same time, the profitability of the franchisor largely depends on the size of the network, so the exit of successful franchisees from it is undesirable. What measures are most effective to maintain network integrity?

– If the franchisor makes changes to the terms of cooperation, then they must be justified and necessarily beneficial for both parties. Then everything will be fine on the network. We have come to the conclusion that it is more profitable for us to develop existing partners than to acquire new ones. Well, is it profitable to work as a franchise? You can check in a simple way: Find out how many closed branches the franchisor has and how many of its partners have opened more than one branch in their region. These indicators will give a complete picture of the interaction between the franchisor and franchisees. If there are partners in the network who have opened more than one branch, then the franchise is working.

Is it profitable to buy a franchise?

There is a strong opinion that franchising is profitable in Russia. But only to the franchise owner. They pump maximum money out of a subordinate partner, after which they mercilessly deal with him and find a new “sucker”. This is the downside, and the background to such opinions can be a variety of circumstances: from the real shortcomings and “dampness” of a particular franchise to this moment time before cooperation with ordinary scammers.

And, of course, the business qualities of the franchisee himself play an important role. Despite his subordinate position, his work in no case becomes the performance of the duties of the branch director. This is a full-fledged entrepreneurship for which you need to be prepared. If the franchisee is not successful, two options are possible: either he runs into losses and closes himself, or the franchisor opens a competing outlet in his region, and the franchisee closes anyway.

In other words, if you want to take out a franchise, don't expect to just pay money and everything will come on its own. Efficiency depends on you. A lead partner's experience will help minimize mistakes, but they won't do absolutely everything for you. You will also have to work with staff, train them, monitor their work, and at the same time fine and fire them. Like an independent entrepreneur, you will resolve financial and accounting issues, build relationships with the tax inspectorate and regulatory authorities. Moreover, gross violations here may become grounds for termination of agreements. Inappropriate clients, theft of goods and other force majeure situations are also your problem. If you are not ready for this, you should think about whether you need your own business and whether you would be more comfortable as an employee.

Choosing a franchise is another one serious problem, which every potential buyer cannot avoid. Everyone's conditions are different, and it is impossible to predict whether a project will succeed or not. It is also difficult to find out in advance how the owner of the chain treats his “wards”, since not all reviews on the Internet are true and not every negative review was due to the fault of the franchisor.

In the process of preparing the material, we talked with one of the leading franchisees of the Sol Plus network, Valentina Eganova, and found out how franchising is seen from this side.

Franchisee's point of view

– First, a standard question: tell us how you became a Sol Plus franchisee.

– I am the mother of two wonderful children – Nastya (12 years old) and Andryusha (4 years old). And for me, like for any mother, their health is important. Our daughter was seriously ill in 2011, and for the next 4 years we were on constant sick leave: sick for two weeks, healthy for a week. Once, at a sanatorium, my daughter and I underwent a course of treatment in the salt room, and after that my daughter did not get sick for several months. I had little entrepreneurial experience. The idea arose to open the same business in our city, because salt room really needed by many. We started collecting information the best option It turned out to be a franchise purchase. We opened on July 30, 2016.

– Have you considered the possibility of starting your own business, and why did you decide to buy a franchise?

– The possibility of starting our own business was not considered, as we understood that we did not have sufficient knowledge in this area. It is very important that we initially wanted to provide this service in our city in a high-quality and professional manner. That is why we began to study opening proposals salt cave by franchise. We decided to build a business with SOL+. The team was important to us. I studied not only the proposed franchise, but also its entire structure, all its branches. In "SALT+" all information about the franchise and the people who joined this network is available.

– How are problems that arise during work solved?

– I know that at any moment and at any time of the day I can ask a question and I will receive an answer. Informational, legal, educational support is very important. There is also a full-time designer who always understands exactly what my branch needs and what layout needs to be created. All this is included in the cost of monthly royalties.

– Yes, we have already recouped the cost of the franchise. It seems to me that the tactics given by the leaders of “SALT+” work very well.

– What advice could you give to people who are planning to buy a franchise?

– Pay attention to how training is conducted in the team, whether there is support 24/7. What is included in the cost of a franchise, is the proposed cost of a franchise really “turnkey” or will there be additional costs.

Relationships may not work out

Franchising relationships are not only about teamwork and are not always beneficial for both parties in the long term. First of all, this is a business. Sometimes comfortable and mutually beneficial. And sometimes tough and merciless. At some point, a situation may arise when the terms of cooperation change and/or the franchisee becomes closely in a subordinate position. And the point here is not always that someone is right and someone is wrong. This is the reality of business, and you also need to be prepared for it.

A few years ago, a chain of board game stores encountered difficulties. The clash of interests of the manager and subordinate partners caused several franchisees to leave the network.

Some of them subsequently merged into the competing chain of stores “We Know We Play,” which operates on the principle of cooperation.

“Thirst” found out from both parties the circumstances of what happened and how the gap affected the business.

Azat Nurmukhametov

ex-franchisee of Mosigra, co-owner of the network “We Know We Play”

– How and when did you become a Mosigra franchisee?

– It was in March 2011. Remained there until September 2013. There were no other board game franchises at that time, so I didn’t choose one when starting. I didn't look at anything at all. I had my own business with a friend, the friend suggested that I also do board games, I agreed. It was new and interesting.

– What are the pros and cons of franchising, if you look at it from the point of view of the franchisee?

– The advantage is third-party experience and past experience. At the time of launching the business, I knew nothing at all about this business: from the assortment and pricing policy to marketing and sales techniques. It was a great experience to host games. The disadvantage was that we had to pay VAT and a markup to the supplier. At first there were no royalties, but then they appeared. There were also difficulties with training. Prompts were given, but at first there was no organization of training as such. The only thing was that it was possible to get a job and work temporarily.

– What is the main advantage of starting your own business?

– There is no need to pay intermediaries. We got direct access to suppliers, which gave us up to 33% increase in profitability. There was freedom of action for development.

– Is it more difficult or easier to run your own business?

– Neither more difficult nor easier. Differently. More interesting. Working for yourself is always more interesting.

– When you created your own franchise offer, did you take into account your previous experience?

– Changed the system of interaction between branches. We have a different philosophy - one for all and all for one. I still have a store, I go through all the successful and unsuccessful moments together with the entire network, I continue to gain experience and share it.

– If we assume that you started creating a business all over again, would you go through the path of being a franchisee all over again?

- Yes, I would pass. It’s cheaper to learn and create your own business by going through other people’s rake.

Sergey Abdulmanov

co-founder, head of the marketing department of Mosigra

– Sergey, can you tell us what the story was about the franchisee leaving the network several years ago?

- Well, that's the story. Working with franchisee partners is a rather complex business. Because unlike subordinates, who must do everything their boss says, franchisees are independent businessmen. They have their own opinion: what and how to do. There is a system manual, a 400-page book on how to do everything step by step, there are all the documents from job descriptions cashier to detailed IT instructions, there are all the layouts for advertising and so on. But here it is: only what directly affects the brand image is fixed as strict rules. The rest is essentially a recommendation: basically, all disputes arise around the border - where exactly the responsibility of the franchisor ends and the responsibility of the franchisee begins. We had a case when a group of our franchisees broke away and did a similar business - this also happens with all large franchisors. We are confident in our brand, in our model and in the quality of our offer - years of successful work in the market show that no one can repeat our result - even with numerous attempts to copy the business model.

– Has the franchise offer changed now compared to what it was in 2013? We were told about shortcomings in the education system - how are these issues organized now?

– It is constantly changing, we are improving the model, and increasingly expanding the portfolio of games with exclusive prices. Several years ago, we switched from a product franchise to a free purchasing model, so that we would not have to resell goods, and our partners could work with our warehouse or purchase from anyone. Franchisee training is carried out through the transfer of a franchise book (this hefty system manual) and consultations of two special people, one of whom is a franchisee manager, former manager one of our stores, who knows all the practical details right down to the operational management. For consultations, all these years a common portal has been formed and finalized, where you can ask any question. If you have any questions, you can always write to the founder, he will answer. We are now thinking about distributing sales school videos.

– Did the departure of an entire group of franchisees somehow affect the sustainability of the business?

– It took about three weeks to open our own outlets in Yekaterinburg and Chelyabinsk. They did well from the start, since it was the combination of the brand and the website, for example, in Yekaterinburg that brought the store 2/3 of orders.

- In fact, we decided to make a bias towards own stores in return for the franchisee?

- Not really. It’s just that in these two cities many people were looking for our store. It would be stupid not to occupy the vacated niche. We would have loved to open with another partner, but it was high season and we decided not to waste time.

Due to the prevalence of the situation with the emergence of friction between partners, we could not help but turn to a lawyer to clarify some of the legal nuances of franchising.

Lawyer's point of view

– Several types of agreements are used to register a franchise. The main one is a concession agreement, but license agreements and commission agreements are also used. What are the main nuances different types contracts? Is it possible to say that all types of contracts, except concessions, can hide fraudulent schemes?

– If we are talking about franchising, then there can only be one agreement - a commercial concession agreement. After all, when franchising, not only the rights to a trademark are transferred, but also many other rights, including such specific ones as the knowledge and skills of the franchisor. And it is the commercial concession agreement that best protects both the franchisor and the franchisee from unfair actions of the partner.

If by agreement only the rights to a trademark or an invention are transferred, this also happens, a licensing agreement is concluded. Then the owner of the trademark (patent) receives royalties and does not care about anything else but the “good name” of his trademark.

The commission agreement has nothing to do with franchising, like other agreements encountered in our practice (distribution, supply, joint activities, provision of services, etc.). The listed agreements can be concluded within the framework of a commercial concession agreement, but if the “franchisor” offers to conclude only one of these agreements and calls it franchising, there is reason to worry.

– Are there any legal features a fraudulent franchisor?

– You need to think about it if the franchisor proposes to conclude a vague agreement with a vague title, which very weakly, if not at all, states its obligations and responsibilities. If the franchisor has signs of a shell company (this can be checked using the database tax office). If the franchisor appears too often in the file of court cases as a defendant. If he avoids state registration at Rospatent. If the franchisor avoids transferring franchise documents to the franchisee.

– What should a potential franchisee pay special attention to when studying the contract?

– First of all, on the subject of the contract: what exactly he will get for his money. Read your rights and responsibilities carefully so you don't miss what you can and can't do. Also carefully study the responsibilities and rights of the franchisor. Sometimes the franchisor includes only his rights in the contract, forgetting that, according to the law, he also has responsibilities.

Pay attention to the section “Responsibilities of the Parties”. The franchisor often stipulates penalties in the contract for the franchisee’s violation of its obligations, and this is normal. But the main thing is that these fines are not exorbitant. Also, the franchisee can provide for mirror liability of the franchisor. And if the franchisor actively objects to this, then there is reason to think about it.

The conditions for terminating the contract are also important. It is very important to know what not to do so as not to lose your business, and also to be able to get out of business with minimal losses.

– What requirements for franchisees are usually specified by owners in contracts?

– Depending on the type of enterprise:

Do not spoil the image of the franchisor, strictly adhere to the quality of goods and services.
Do not conceal revenue and provide reporting on the activities of the franchise enterprise.
Facilitate inspections.
Complete training, both initial and repeated.
Coordinate the design, signage and other details of the enterprise premises.
Purchase goods from certain suppliers.
Conduct promotions, promote services/products in the territory assigned to the franchisee.
Set certain prices for goods and services.
Do not engage in competitive activities.

And you can add, etc., etc., because all this is individual.

– What legal mechanisms exist to protect the franchisor from copying the business system?

– There are no legal mechanisms to protect against copying. It is possible to provide in the contract a ban on the creation of such enterprises after the termination of the contract. But this ban cannot be made for life. Here it is important to understand that the franchisee buys an already “promoted” name from the franchisor; he starts his business under a name that has already earned a certain authority in the market. If the agreement terminates, the franchisee loses this name. And if, for example, a cafe with good famous name brought him profit and clients, it is not a fact that the same business with the unknown name “Romashka” will be successful and remain on the market.

– How common are legal confrontations between a franchisor and a former or current franchisee, and on what issues? Whose side does the court usually take?

– Arbitrage practice not very extensive. They usually sue over non-payment of royalties. There are claims to invalidate a commercial concession agreement due to lack of state registration. There are claims for unilateral termination of a contract due to failure of one of the parties to fulfill its obligations.

The court takes the side of the person who can document his claims. Having supporting and properly executed documents is very important. Without them, it will be difficult to prove your case in court.

____________________

From all that has been said, one conclusion can be drawn. Franchising is far from a clear-cut phenomenon. The effectiveness of each specific cooperation depends on many factors.

To choose the right franchise, Thirst advises following several recommendations:

Start by choosing your field of activity. Then carefully study the market: then it will become clear to you how great the potential of your own enterprise is in this direction. If successful work requires special expensive technologies, there are serious risks, or you simply do not have enough entrepreneurial experience, choose to buy a franchise.
When choosing among several offers, do not focus only on the amount of the lump sum fee and royalties. Find out what exactly you will get for the money required by the franchisor. Find out how many existing subordinate partners the franchisor has, how many were opened and closed during Last year, whether there are competing franchisees in the same territory in any region, whether there are partners in the network who own more than one branch in their region.
Consider the legal side of the issue. When signing an agreement, we recommend using the services of a lawyer who specializes in franchise agreements. Remember that after the contract is signed, it is much more difficult to protect your rights than before. If for some reason this is not possible, focus on the rights and obligations of both parties, the terms of the contract and penalties for violations. Check the franchisor with tools tax service, and also use statistics of court cases against the franchisor or others where the franchise owner appears as an individual.
Be sure to obtain from the franchisor the contact information of current and (preferably) former franchisees. Both positive and negative reviews may provide food for thought. However, remember that personal relationships affect the assessment. Try to highlight the objective facts in the negative review, and then carefully find out how the franchisor is currently dealing with them.

If the question of terminating a franchise agreement arises, first think about how necessary it is. It is far from a fact that your company will retain its popularity under another brand. Moreover, the franchisor will probably get his bearings quickly and open another partner or his own branch in your region. If the decision is made, it is again worth consulting with a lawyer so that the “divorce” goes smoothly.

Any business activity is always associated with risks. Opening own business, an entrepreneur puts a lot at stake - his capital, personal property, and in some cases, borrowed funds. This is why it is so important to assess the market situation at the planning stage, calculate the payback period of the project, etc.

An alternative for many entrepreneurs in the conditions of economic instability characteristic of the current time can be a franchise business. This format of work allows you to largely count on your business partner – the franchisor, who provides significant support and, in essence, provides ready-made tool for doing business. However, the franchise also has “ back side medals" are regular deductions in favor of the owner trademark. To find out what it is and in what cases a franchise business can be profitable for an entrepreneur, read on.

What is a franchise business?

To consider a franchise business as one of possible options implementation entrepreneurial activity, you need to figure out what it is.

Franchising is a format of mutually beneficial business cooperation, within which one party (the franchisor) transfers to the other (the franchisee) the right to sell goods and provide services or produce products with subsequent sale under its own brand.

In this case, the franchisor dictates the terms of use of the brand, including the amount of the initial (lump sum) and subsequent payments (royalties). For his part, he undertakes to provide ready-made system doing business, in other words, operating business-plan. In addition, the franchisor provides all kinds of support to the entrepreneur who has entered into an agreement with him in the form of training, the opportunity to use an advertising campaign, etc.

This type of interaction is beneficial for both parties: the franchisor gains wider popularity and enters new markets, and the franchisee gets the opportunity to become a successful businessman, acting according to a ready-made, proven scheme.

In Russia, franchising first became known in the last decades of the last century. It is believed that the first franchise was sold to domestic entrepreneurs by Baskin Robbins in 1993.

It must be said that franchising in Russia today is particularly popular among small and medium-sized businesses and is developing largely in three directions:

trade;
provision of services;
catering.

Why is franchising so popular among small businesses? The answer is quite simple: a franchise can be purchased for relatively little money, and cooperation with a large company organizing the transaction allows you to gain invaluable experience in entrepreneurship. Read also what there are to choose an interesting option for yourself.

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Advantages and disadvantages of a franchise business

To understand whether a franchise business is profitable, you should consider in detail the strengths and weak sides this type of entrepreneurship.

The obvious advantages of the deal for franchisees include the following features of the franchise:

the contract indicates the exact amount that you will need at the start - you do not need to calculate it yourself, you do not risk making a mistake, the calculations have been made for you the best specialists in the field of business planning;
the popularity of the franchisor's trademark (name, brand) will provide you with a ready-made client base even in the early stages of business;
franchisor support: training, consulting, marketing programs and much more, because the company is directly interested in your success;
free advertising – the franchisor invests a lot cash V advertising campaigns, the results of which you can also use, since you work under his name;
a ready-made scheme of actions - a business plan will allow even an entrepreneur who does not have sufficient knowledge and experience in the field of entrepreneurship to implement his project within the framework of a franchise;
the opportunity to cooperate on favorable terms with the franchisor’s partners - collective purchases of all materials necessary for the production and sale of a product (goods, services) will provide substantial discounts, for which individual entrepreneur, if he acts independently, there is no need to count.

Important! As the experience of a franchise business shows, on average, the payback of such a project is achieved in 6-18 months. This is also an advantage for franchisees, since in the current conditions economic crisis Russian banks are more focused on short-term loans for a period of up to two to three years rather than long-term credit programs.

Along with obvious advantages, the franchising business is also characterized by some disadvantages.

First of all, these include constant monitoring of the franchisee’s work, which in one way or another limits his independence. The entrepreneur's activities must comply with established standards developed and implemented by the franchisor. Majority large companies monitors the quality of franchisee customer service very strictly. This is justified by the intention to maintain the existing image and authority of the company.

In addition, the entrepreneur will need to constantly pay (within the scope of the contract) for a ready-made business model. Initially, the franchisee must make a lump sum payment representing the cost of starting the franchise. Next, you have to make regular payments - royalties in the form of a percentage of profits or a specific amount specified in the contract.

Among others, the disadvantages of franchising business include the absence in Russian legislation of clear rules and regulations governing the operation of franchising systems. This circumstance is one of the reasons for holding back the development of franchising relations in Russia.

All the pros and cons of a franchise business are discussed in more detail in the following video:

What is better - a franchise or your own business?

When opening any business, you need to be guided not only economic prerequisites. It is important to take into account the region in which the future entrepreneur intends to operate, the socio-demographic situation that is typical for of this region. If you are planning to purchase a franchise of a particular company, it is advisable to evaluate the future partner for fame and trust among consumers in your region.

When thinking about the topic “franchise or your own business,” you need to have an idea of in which area the activity will be carried out. Where the market is crowded with well-known and popular brands (clothing and footwear retail, fast food establishments), it will not be easy for an entrepreneur who decides to compete with large companies.

The businessman’s own ambitions also play an important role in resolving this issue. You must understand that when buying a franchise, you come under the close attention of the franchisor, who will largely restrain your activity. Enterprise development that goes beyond the business plan will simply be unacceptable.

The franchise is ideal for entrepreneurs with equity, but have no idea how to profitably use it to make a profit. Investments in such a project will allow you not only to find yourself in the business world, but also, with the support of an experienced partner, to build a successful enterprise that generates high income.

It is no secret that organizing your business from scratch requires large expenses and involves significant risks. According to statistics, about 50% of small businesses do not survive even two years on the market. Using a well-known brand for new entrepreneurs significantly reduces risks and allows you to bypass most « pitfalls“, which is why franchising is becoming increasingly popular. Franchising is an organization business relations on opening and running a business. The subject of such an agreement is a franchise - the right to open a business under a well-known brand for a certain fee using technologies and production secrets.

In this article I will talk about whether a newcomer to the business world should buy a franchise business. You can also watch my video on the topic of whether it is profitable to buy a franchise now:

Franchise– the most accessible and fairly fast method of developing a business for beginning businessmen, requiring minimum investment. Below we will talk about the advantages that come with purchasing a business model under a well-known brand:

If you need help in selecting a profitable franchise or auditing the chosen one, contact me, I have extensive experience in franchising, I will be happy to help!

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What problems might you encounter?

It would seem that the answer to the question: “Is it worth purchasing a franchise?” obviously positive, however, one cannot fail to mention the negative aspects of this business model.

Restrictions and fines. The activities of the franchisee entrepreneur are strictly regulated by the terms of the contract, so there is no “room for creativity” in this business. Moreover, when a violation of the conditions of the company that owns the brand is detected, a strict system of fines is provided.
Lump sum payment. A one-time payment for joining the network and the right to work under a well-known brand. The financial factor is important for beginning businessmen, and some franchises have a high cost.
Royalty payments. Regular payments for the right to use the brand. Despite the fact that this is an additional financial burden on the franchisee, the transferred knowledge and technology base can quickly recoup these expenses.
Franchisor's property. When purchasing a franchise, you should understand that upon termination of the contract, all commercial information transferred to you at the conclusion of the contract is provided for, since this is the property of the franchisor. You will not be able to work in this area of business, although you have already studied all the nuances and technical processes. Main advantages and possible problems, which you need to familiarize yourself with before deciding whether a newcomer should buy a franchise, I also recently covered in a video on my channel. I think you will be interested in checking it out.

Real reviews about franchise business

Of course, to study the business model that interests you, you need to read the reviews of people who have already bought it, and if there is an opportunity to better get to know two points of view: current and former franchisees. You can also find reviews on the Internet, below I will give some of them.

Let's start with positive reviews. It's no secret that various options for organizing leisure time for preschool and younger children school age are now in great demand. Below is a review from a franchisee who opened a language school as a franchise and was very pleased:

“I’ll tell you my story of cooperation with a well-known language school brand, and share my review of the franchise. From my own experience, I am convinced that teaching foreign languages children find it much easier with early age. I started looking through the catalog of the most profitable franchises in Russia and saw a network of language schools. We decided to try it!

Within the first six months of work, it became clear that the methodology developed by the network’s specialists was producing excellent results. All teachers of my Center were approved through the head office. They know the language they are teaching perfectly and are able to work even with the youngest students. Class programs are designed in such a way that you can join the group at any time. The franchise paid for itself quite quickly, I receive support for running my business, and new materials are constantly being released. Once a week we meet at webinars, they are conducted by employees of the head office, and every year we gather for meetings - all franchisees and employees of the management company!”

Today there are a lot of parents who want to make their unfulfilled dreams of the big stage come true in their children. According to statistics, 70% of girls aged 5-7 years have attended dance schools at least once. In the review below, the franchisee shares his impressions of opening a choreographic school as a franchise:

“I have dreamed of my own business for a very long time. But, as a girl, I wanted my business to be not only profitable, but also beautiful. For a long time I couldn’t find my direction, such that I really liked everything and would be able to do it. I accidentally found information about a choreographic school franchise. It took me exactly a month from the moment I signed the contract to the opening of the school. In the materials provided to me, everything is accessible and written in detail. A pleasant bonus was the franchisee chat, where we feel like one huge team and always find answers to questions together. Taking into account the transferred theoretical and practical basis, we were able to gain a leading position among our competitors, and this cannot but inspire! I haven’t regretted my decision to open a choreographic school as a franchise for a minute!”

Catering franchises are very popular due to high demand among buyers. For example, a franchisee who purchased a cafe franchise talks about his successes:

“Why did I choose this particular franchise? I think it's a very reliable franchise - that's the first thing. Secondly, there is a very rich assortment of various baked goods. I have about seven years of entrepreneurial experience, all this time my activities have been related to catering. As an experienced technologist, I studied production technologies and was satisfied.

I'm very pleased with the opening of this business and interaction with the franchisor directly. The management company’s employees answer any questions, provide competent advice, and there is support day and night!

A franchise business related to the sale of clothing will undoubtedly be in demand. However, there are also dishonest franchisors, the author of the following review encountered some of them:

“I became another unhappy client who bought a franchise of a famous clothing brand. The design of the store seemed interesting to me, the sales manager explained everything very beautifully - and I, of course, believed it. At first there were no problems, we made a design and conducted training. But as soon as I transferred the money to purchase the collection, problems immediately began, much to my chagrin! There was no delivery of the goods; various complications were always being invented. The delivery took a long time, I wasted time and lost clients. In the end, I decided to purchase collections from other suppliers myself, since I did not know how much longer it would take. I made the right decision! However, the franchisor behaved extremely dishonestly, no one returned the money, and there was no support during the work process. According to the management company, it is only needed at the time of launch. Although I overcame my difficulties, I do not recommend this franchise to anyone!”

The following franchisee had a negative experience from purchasing a catering franchise:

Conclusion: is it worth starting a business under a well-known brand?

I hope this article helped you answer the question of whether a beginner should purchase a franchise, as well as understand all the intricacies and nuances of this business. Of course, this decision requires the most detailed study of all information about the company that owns the brand, analysis of competitors, and obtaining feedback from current and former franchisees. Think, study, analyze and don’t be deceived!

Experts from our franchise catalog regularly talk about how to choose the right franchise, what to look for, and what questions to ask the franchisor. But there are times when investors, falling in love with a concept at first sight, fail to evaluate the proposal with a cool head. To stay sane when making your choice, it's worth having a list of statements on hand that indicate that you need to take a closer look at the terms and again weigh the pros and cons. Perhaps the franchisor's goal is not to build a long-term partnership, but to obtain an initial payment by any means.

1. There are no requirements for future franchisees

The franchisor has been building its network for years, fighting for guest loyalty and reputation in the market. How larger network, the more stringent its work standards and the stricter the control over their implementation. Otherwise, it is impossible to maintain uniform quality, and therefore preserve reputation. Franchising implies the responsibility and dependence of each individual franchisee to colleagues in the network and the entire system as a whole. Therefore, the franchisor must have clear requirements for personal and business qualities future partner, to his reputation, experience, ability to work in a team, his capabilities and connections in the region.

2. Promises of regular income without personal participation in the project

A franchise is just as much an entrepreneur’s own business as any other. We can say that the franchisor provides a fishing rod and teaches how to use it, but the catch directly depends on the franchisee. In practice, each franchise project requires constant personal participation of the franchisee and control of all processes.

3. Lack of a registered trademark

A franchisor planning to build a network and long-term presence in the market will definitely legitimize its right to the brand. The use of an unregistered trademark and any manipulation with it is illegal and can lead to problems with law enforcement agencies for the franchisee. You can check your rights to a trademark in the open register of Rospatent by indicating the certificate number provided by the franchisor. Entity, for which the trademark is registered, must match or be affiliated with the one used to conclude agreements with the franchisee. And further important point: Registration of a trademark in Russia takes about a year. If the franchisor shows you the number of the application filed with Rospatent, this does not mean anything. The office may refuse registration if the trademark already belongs to someone.

4. Claims that there is franchising without investment

The franchisee receives the right to operate under a brand that is a valuable intangible asset of the franchisor and simply cannot be provided for free. In addition, a franchise always means certain time, human and financial costs, which, according to the laws of economics, must be compensated. The franchisor trains the franchisee, controls his work, and therefore spends money on maintaining a franchise manager or an entire department.

5. The franchisor is an aspiring entrepreneur in this niche

If a franchise project is proposed with a hypothetical business plan that has not been confirmed in practice, then the franchisor, as expected, will not be able to help in launching and developing the business, warn about seasonal, competitive, niche and other risks and ways to mitigate them. It is better if the franchisor has at least two operating network points. This will prove that the success of the business is not accidental and the system is really well thought out. Only such a franchisor can replicate his business, and not experiment at the expense of the franchisee.

6. Franchisor - multi-holding, expert in all areas of business

Companies began to appear on the market that offer 4–5, and sometimes 10 franchises in completely different segments. They should not be confused with franchise directories or brokerage companies. These are franchisors who confidently offer to open and maintain the business of their franchisees. The owners of such companies have a good sense of the market situation and offer the types of business that are in demand at the moment. Barbershops, burger shops, gyms, kindergartens and dry cleaners are usually run by the same franchise managers. Franchisees submit standard packages of documents and enter into uniform contracts - only the brand names change. This cannot but affect the quality of the partnership and will lead to inevitable disappointment for the franchisee.

It is worth remembering that a real franchisor is always a professional in a particular segment. This could be a large restaurateur with various concepts - a restaurant, fast food, coffee shop - or a retailer with several brands, but these are always projects that are close in business processes and technologies.

7. Refusal to meet in person with the franchisor, offer to meet in a cafe near the metro

A high-quality franchisor is not just a bright website, but an operating business, a team of managers, a flagship enterprise (office, restaurant, store). You need to see all this before signing a franchise agreement and form your own vivid opinion about the company.

The success of a franchisee depends not only on the economic and legal aspects of the business, but also on the personality of the franchisor. You should enjoy interacting with the franchise owner and the manager who will lead the project. Only then will communication be effective. A personal meeting is necessary to determine whether you can work in this franchise system, whether you share the values of the chosen brand and the franchisor company.

So, if your answer to at least two points from the list presented is “yes, this is about the franchise I have chosen,” then I recommend conducting a more in-depth analysis of this franchise offer, and ideally, refusing to purchase such a franchise.

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50 main questions for a franchisor- what to ask the franchise seller

Hello dear readers. Let's talk today about franchising, its prospects, development and advantages for franchisees in the person of aspiring entrepreneurs.

In my opinion, a franchise is a great way to start with minimal risks, because the business model is perfected for you.

But in order to form a more objective point of view, I asked several identical questions to franchisors: Fedor Ovchinnikov (Dodo Pizza) and Anna Zagrebelnaya (Mosigra).

I hope that this article will dispel the doubts of aspiring entrepreneurs who are thinking about whether to start their own franchise business or not.

CEO and founder of a pizzeria chain. The network has 7 own and more than 80 franchise enterprises.

Franchising in America has been developing since the mid-19th century, for more than 150 years. In Russia only 20 years. Of course, there is room for improvement; the existing number and quality of franchises will grow steadily over the next decade.

When you start your own business, especially your first one, there is a high risk of making mistakes that can lead to ruin. Franchising minimizes the number of errors because the franchisee is provided with a ready-made working business model. If you are just starting out in business, we recommend franchising.

Yes, I think so, because... During a crisis, the economy is not stable. Taking a working business model is less risky.

0%. If the franchisee focuses on our business, it will be profitable.

The market economy in Russia still has a long way to go in order to reach the level of developed countries. Western countries. Now in Russia there is a new generation of young entrepreneurs who want to develop. The future of franchising in Russia is very promising.

Also watch an interesting video (although there is more listening than watching) - Dmitry Potapenko’s interview with Fedor Ovchinnikov:

Commercial director of the company. The network has more than 20 own and more than 35 franchise enterprises.

— Do you think that franchising is developed in Russia or is there still great potential for growth?

First of all, a franchise is a proven working model. And the difference between opening your own business and a franchise is precisely that for the first year or two you won’t have to feel your way blindly: everything has been explored, laid out step by step and tested. The problem is that this story has not been developed: for the most part, the franchising market now is a market for product franchises. Yes, it is developing, but the current crisis will slow down this process. I think the next good round will begin in conditions of a sharp increase in competition after the crisis, when those large players who were now changing quality to additional sales, will leave the market and new players will enter.

— Why is franchising attractive for a beginning entrepreneur? You started from scratch, so why shouldn't others start from scratch?

Protection from risks, a proven business, the ability to consult with other managers at any time.

— Do you think that opening a franchising business during a crisis is more profitable and easier than starting from scratch?

Yes. Look at the risks of small businesses and the percentage of enterprises leaving the market. A franchise greatly increases your chances of success.

— What percentage of franchisees have closed their business over the entire life of your franchise? What were the main reasons?

Less than 4% closed their business in our area completely (moving to another country, change of business, family circumstances), we closed at least 4 more points on our own for non-compliance with the service (they became our wholesalers), a couple more points stopped working under a franchise and switched to category of wholesalers (although there were also returns).

— How do you see the future of franchising in Russia?

Cheerful as a blow with a baton in the dark.

Conclusion

First of all, I want to say a big thank you to Fedor and Anna for agreeing to answer my questions.

Any franchisor will say that opening a business with a franchise is profitable! Is that what you thought? But the percentage of franchisees that have closed speaks for itself. It is close to zero, which means the benefits of franchising are obvious. Just recently I published and entrepreneurs do not regret at all that they opened as a franchise. In the future I will try to publish more such interviews.

One conclusion can be drawn. The main thing is to choose the right franchise for yourself, with which you can work and with which you will be interested in working (ours will help you). In franchising, like in any business, you need to work and invest money. But by buying a franchise, you are buying a ready-made business model, a well-promoted brand, the franchisor’s experience and constant support, which minimizes the risk of failure.

That's all. I look forward to your comments! Ask questions and share your experience if you have dealt with franchising.