Every year, more and more both beginners and experienced entrepreneurs, when starting a new business, think about buying a franchise. And this is not surprising, because it provides a huge number of advantages. But if experienced cooperators are well versed in this, then beginners have a lot of questions. In addition, as statistics show, the majority simply do not pay back the perfect investment and go broke completely during the first few years of work.
To make the investment a success, let's try to figure out what a franchise is and how it works. Also in this article will be considered in detail the most attractive sectors of the market in which it is best to invest money.
general information
First of all, you need to understand the main aspects of this type of activity. What is a franchise and how does it work?
In simple words, this is a kind of privilege that allows novice entrepreneurs with a small starting capital, who do not have much experience, to start their own business.
By purchasing a franchise, the buyer receives the right to use the trademark and sell under it certain goods and services prescribed in the contract. In addition, the franchisor provides full information and technical support, fully working technology for doing business, corporate design of the premises, and also helps to promote the company in the market. Thus, the franchisor will not have to independently draw up a business plan, develop a thoughtful marketing campaign, train staff and deal with other issues on which the success of the project depends.
How it works?
Let's dwell on this in more detail. A franchise business is quite specific and has many pitfalls that a novice entrepreneur must take into account. Therefore, before buying it, you need to understand the basic nuances in order to avoid many problems in the future. First of all, you should understand how the franchise works in business. This is very important, because sellers do not always provide complete information about their products. Accordingly, newcomers cannot really assess the profitability of a future business. If you do not want to throw money away, then before buying it is best to study the state of affairs of companies already operating under your chosen franchise. You can also talk with their directors and ask if it is worth investing in this area.
The franchise business operates as follows:
- the franchisor prepares a quotation and puts it up for sale;
- interested entrepreneurs conclude an agreement with him and make a lump-sum payment;
- the franchise owner assists customers in opening the outlet, and also provides a fully developed technology and work scheme, business plan and equipment.
Thus, if you do not know how to work on a franchise, the franchisor will help you figure it out. When the point of sale of goods or services is completely ready for normal operation, it passes to the management of the franchisee.
Franchise and franchising: what are the differences
What you need to know about this? Next, it will be described in detail how to start working on a franchise from scratch. However, first you need to understand a little about the basic terminology.
Many aspiring entrepreneurs who first hear words such as franchise and franchising believe this is the same thing. Undoubtedly, these concepts are interconnected, but there are some differences.
Franchising is an agreement between the buyer and the owner of a trademark for its use. This applies not only to the name, but also to technology, corporate identity and business reputation. This deal is beneficial to both parties. One receives working technology, and the other increases its own profit due to a lump-sum contribution and monthly deductions from net profit. As for the franchise, this is the model of doing business.
Franchise Benefits and Drawbacks
Any business, regardless of type of activity, is associated with certain features and difficulties, and also has its pros and cons. Therefore, in order to fully disclose the question of how to work on a franchise, you must first consider its strengths and weaknesses. As for the benefits, the main ones are:
- the ability to quickly launch and promote a business;
- high brand recognition;
- minimum costs for advertising and promotion;
- ready-made business plan;
- free staff training;
- information and technical support.
As for the shortcomings, they also exist. Specialists distinguish such:
- fine or termination of the contract in case of non-compliance with the rules established by the franchisor;
- the impossibility of changing the concept of doing business and implementing your own ideas;
- impressive initial investment;
- in the event of the bankruptcy of the franchisee, it becomes the property of other entrepreneurs who may put forward their requirements for the franchisee.
According to official statistics, approximately 85% of franchise companies close during the first five years after opening. This is due to the fact that the franchisor suffers large losses due to inept business, too high competition, or for other reasons, after which his company is absorbed by large enterprises. Therefore, before buying, you should well weigh all the pros and cons, so that later you will not regret anything.
How much will a franchise purchase cost?
It is impossible to unequivocally answer this question, since today prices vary in a very wide range. Many beginners consider the cheapest offers, which is not entirely correct, since most of them in practice turn out to be failures. Actually working franchises are also not an entirely suitable option due to the too high cost. The price is formed on the basis of many factors, the key among which is brand recognition and well-functioning business processes.
Today, the Internet has specialized resources and platforms on which franchise owners post their offers with a detailed description and cost. The search is best done through them, because in addition to the business plan, you can also get acquainted with the reviews of real customers. In addition, some companies acting as intermediaries help start-up entrepreneurs with the conclusion of an agreement and the collection of the necessary package of documents.
If you do not trust such exchanges, but do not know how to work on a franchise, then it is recommended that you first consult with lawyers who are well versed in these matters. They will carefully study the terms of the contract and make the necessary adjustments to the document so that it is as profitable as possible for you. Sure, you will have to pay for their services, but as a result of professional advice you can avoid a huge number of problems and save a lot in the future.
Franchises in which areas are most profitable?
The planning and implementation of a business must be approached very seriously. This also applies to the purchase of trademark rights. After all, the project should be not only inexpensive, but also profitable. Many aspiring entrepreneurs are wondering what franchises really work. And this is a very topical issue, because, due to the ongoing economic crisis and foreign sanctions against Russia, enterprises in our country continue to close one after another. Therefore, a key factor in the success of investments in a ready-made business is the choice of the right niche. According to statistics, the most attractive are the following:
- business;
- retail;
- insurance;
- catering;
- tourism.
Next, we will dwell in more detail on each niche so that you can determine for yourself not only the most profitable, but also an interesting and close-minded direction for work.
Franchise Features in Business
We have already discussed the main aspects and terminology associated with the acquisition of a franchise. Most entrepreneurs prefer to invest in existing companies instead of implementing projects from scratch, because it is more profitable. Investments pay off much faster and begin to make a profit. When creating your own business, it will take you several years to reach the break-even level, and when buying the rights to use the finished technology and brand, this process can take only several months.
But here the question arises of how the franchise works in business. Indeed, today a huge number of offers in various industries are presented on the market. No matter which niche you choose, the algorithm will be similar. Of course, there will be some distinctive features, but the essence will remain the same. Now let's talk about the directions that will remain most attractive when buying a franchise.
Retail
There is no point in telling how to work on a store franchise, because even a person who is far from a business has an idea about the functioning of a sales outlet. The process is extremely simple. You define a group of goods, find a franchisor offering the most favorable conditions, and conclude an agreement with him. Then rent a room and make repairs in it, after which you start earning. The main thing is to correctly determine the specifics of the store.
According to experts, today the share of retail stores in our country accounts for 45 percent. The level of competition is high, but the potential profit is incommensurable. In addition, you are not limited in choosing the most attractive destination. You can trade anything:
- children's goods;
- food products;
- building materials;
- furniture;
- auto parts;
- clothes and shoes;
- household appliances and electronics;
- specialized equipment;
- loose tea and coffee;
- souvenirs and much more.
You can say that it will not be difficult to open a store on your own, but this opinion is erroneous. Launching a sales point is not a problem, but attracting customers to it is very difficult. And buying the rights to use the brand, you save yourself from these problems.
How the franchise works in trade has been described above, but its advantages are worth mentioning separately. Among the main ones, the following can be distinguished:
- quick start of sales;
- well-established working methodology;
- well-established product supply channels;
- minimal bankruptcy risks.
As for the disadvantages of opening a franchise retail store, they are not, with the exception, of course, of those that were discussed earlier in this article. Therefore, the relevance of this type of activity is quite high.
What really working franchises exist? According to entrepreneurs, the following can be identified (with the object of sales):
- "220 volts" - power tools and equipment;
- Alisia Fiori - branded children's and women's clothing;
- "Razlivnovich" - draft drinks;
- Florma - decorative cosmetics;
- NeYabloko - mobile phones, smart watches and accessories;
- Respect - shoes;
- "Fragrant world" - wine drinks;
- "Concrete Base" - building materials.
This is only a small part of promising franchises guaranteeing high profitability. In fact, the offer on the market is simply huge, so a novice entrepreneur will have plenty to choose from.
Insurance industry
Another promising area, gaining more and more popularity every year. How to work in a franchise in this area? Very simple! Find a seller, conclude a contract and start providing real estate, car and life insurance services. The advantage of investing in a ready-made business is that insurance is a very complex type of activity, which will be very difficult for a newcomer to understand. And by acquiring a franchise, you minimize any risks. The best offers to date are:
- "Insurance Point";
- FinSity
- Uniqa;
- Grave
- Daedalus
- Axa Group;
- Finance Group.
Each franchisor offers a choice of several products with different conditions of cooperation. The submitted proposals are notable for their relatively low cost and small monthly deductions, which makes them one of the most profitable today.
Catering
If you are concerned about whether it is profitable to work on a franchise, then look at the financial statements of catering establishments. Their incomes remain high, regardless of the economic situation in the country, since people always need food. Also, many people like to spend time with their friends outside the house, so they regularly visit various cafes and restaurants.
Opening a catering establishment is no different from launching any other project. As for the most profitable franchises, the following can be distinguished:
- "Baby Potato";
- Dodo Pizza
- Subway
- "IL Patio";
- McDonald`s;
- "Sushi Shop";
- Wokker;
- Papa grill;
- The Golden Bird.
Compared to other types of activity, food service franchises are attractive in that many of them start making profit already from the first day of work. And according to the reporting provided by their owners, this is true, and not a clever marketing ploy.
Tourism
This direction is quite specific, but with proper planning and management, as well as choosing a good franchise, it will regularly bring stable profits. According to Russian law, only a person with special education and experience in this activity can open a travel company. And the franchise saves entrepreneurs from this need. You just buy the right to use the brand and work quietly. Among the best offers are the following:
- Tour & Tickets;
- "Fly.ru";
- "The store of burning permits";
- "Wind rose";
- Coral Travel;
- TUI.
All these franchises provide favorable conditions and allow you to open a profitable travel agency with minimal problems. However, when buying it, keep in mind that this type of business is tied to seasonality, so profitability will change throughout the year.
Underwater rocks
Despite the fact that when you purchase the rights to use the trademark, you get a fully working technology and business model, as well as assistance in promoting the market, certain risks remain.
Above was described in detail how to work with a franchise. Pitfalls are another important aspect that any novice entrepreneur should consider. Among the most important, experts distinguish the following:
- poor design of the business model;
- too harsh conditions for cooperation;
- high fines for violation of conditions or cancellation of the contract;
- restriction in the choice of suppliers;
- inflated monthly deductions.
In order not to be overwhelmed, you must carefully work through each of the above aspects.
What experienced businessmen say about buying a franchise
Today, many experienced entrepreneurs invest in existing companies. This option is especially good for beginners. And no problem if you don’t know how to work on a franchise. The feedback from businessmen who have been working on them for a long time confirms that this type of activity is very simple and understandable. You just pay the franchisor, and he does almost everything for you. Therefore, do not be afraid, but boldly open franchises.