Concept and main principles of franchising

Introduction

Interest to this construct of economic interaction non insouciant. In malice of the fact that for many Russian business communities the construct “ franchising ” still remains unfamiliar, today we perceptibly practically cosmopolitan usage of its elements in assorted Fieldss of activity. First of wholly, it is shown in active distribution of known trade Markss.

Franchising enables the franchisor to develop the web and to progress the trade grade at the limited ain agencies. Due to the given sort of activity the franchisor & # 171 ; comes nearer to the consumer & # 187 ; . At development by franchising the franchisee who is the independent man of affairs, belongs the income of his endeavor, except for a royalty, and the success of his activity straight depends on ain attempts.

Advantages of franchising consist in response of known grade and the engineerings connected to it. To the franchisee, holding bought the franchise, it is non necessary to believe of publicizing the endeavor, development of image, creative activity of engineerings of work as all this in the sort ready and checked up by clip is got at the franchisor, and advertisement is carried out on-line. Except for it, franchising is protected from a corporate competition: harmonizing to the contract the franchisor in this district will non sell the franchise to anybody to another.

The consumer besides remains in a award – he receives an chance to utilize in the country merchandises ( services ) of the known trade grade of the certain quality and on a unvarying monetary value.

Concept and chief rules of franchising

On the today ‘s minute there is a set of preparations of construct the “ franchising ” , the given dealingss are defined as: Franchising is system of contractual dealingss between caput house and the endeavor little working or created once more, carry oning retail of the goods or rendering services.

Franchising is such organisation of concern in which the company ( franchisor ) transfers the independent individual or the company ( franchisee ) the right to sale of a merchandise and services of this company. The franchisee undertakes to sell this merchandise or services in beforehand certain Torahs and regulations of concern covering which are established by the franchisor. In exchange for realisation of all these regulations the franchisee receives the countenance to utilize a name of the company, its repute, a merchandise and services, selling engineerings, scrutiny, and mechanisms of support.

Normally two groups of business communities participate in franchising. The one, who gives this right ( franchise ) , refers to the franchisor. He has long-run experience in industry of the given merchandise, has developed system, has appropriated to it the name or a trade grade and has knowledge that can ensue in success and that is non present. The franchisee is a individual whom buys the right on concern covering ( franchise ) under the certain name or the trade grade.

Franchising can be determined as a manner of bringing of production or services to the consumer, a manner of development of concern and a addition of the market on the footing of cooperation stuff and fiscal assets and attempts of the assorted endeavors.

Franchising can be considered every bit good as the understanding at which the maker or the privately-owned distributer of a merchandise or the service, protected by the trade grade, gives sole rights on distribution in the given district of production or services to independent business communities ( retail traders ) in exchange for response from them a royalty under status of observation of engineerings of industrial and functioning operations. The royalty is the regular pecuniary tax write-offs made by the franchisee to the franchisor for engagement in his web. Represent either the fixed amount, or involvement from a revolution of the franchisee.

In franchising as it was already marked, two groups of business communities participate: the franchisee and the franchisor. Benefits from association of attempts in concern to take uneasy. When people cooperate, it gives non merely the utile consequence, but besides creates the certain troubles and the limitations following from system of cooperation. Each spouse should subordinate itself of an overall purpose, to the general regulations, the general agreements.

The kernel of franchising consists in such manner of endeavor concern at which the house – franchisor gives the spouse ( franchisee ) the right to transport out the certain sort of activity with usage of the engineering, licences, a know-how, the house trade grade. The contract imposes on the franchisee a figure of duties – a payment for usage of licences, rigorous observation of criterions, instructions on the organisation of concern. Besides in the contract besides the fiscal control of activity of the franchisee, as a regulation, is provided on the portion of the franchisor. On the other manus, franchising enables the man of affairs to get down ain concern, utilizing experience, cognition and support of the franchisor.

The franchisee himself pays disbursals for creative activity of concern. The franchisee buys an chance of preparation and the aid at creative activity of concern from the franchisor and wages ( royalty ) for usage of a trade grade, know-how and systems of carry oning plants of the franchisor. Very much often the pupil gives really favourable price reductions for the of import bringings ( stuffs, account average ) . These price reductions ever enable the franchisee to purchase merchandises from the franchisor under lower monetary value and therefore it costs more stingily than to develop concern without the franchisor. The franchisee does an initial payment for the aid on creative activity and gap of concern. The franchisee takes up a responsibility to pay monthly payments for the right utilizing the hallmark and concern by system and for support, preparation and the consulting, given by the franchisor. If all goes under the program the franchisee conducts successful concern, and its net income surpasses disbursals.

Therefore, in the turning markets, such as Russia, franchising is the fastest manner of preparation of business communities to practical criterions, which are necessary to carry on profitable concern. For the companies franchising is a manner of distribution of concern. For business communities franchising is one of ways to go the proprietor of concern.

Advantages and deficiencies of franchising

Having considered the care and intent of franchising, and besides holding defined chief rules of operation of system of franchising, we can to apportion the basic advantages and deficiencies of franchising as sum uping the given chapter.

The basic advantages of franchising consist

For the franchisor:

The franchisor develops the construct of concern and proves its favorableness on an illustration of ain stores. He divides the experience with all franchisees of system, giving them an chance to carry on the concern as is successful. Therefore, if the company wants to happen out, it is possible, whether to transform their concern into the successful franchise, they merely should look every bit far as has successfully passed such transmutation into the friend, similar concern. The success of the franchise company in much depends from profitableness concern of the construct. Sale of the franchise brings considerable money which can be enclosed in the farther development of concern. Having signed in add-on some franchise contracts with franchisees, the franchisor can sell him other services in direction, such, as particular support on consulting and selling. Both deals ( initial sale of the franchise and sale of particular services ) are an extra beginning of the income for the franchisor. Besides all working franchisees monthly wage to the franchisor for granting of services. The portion of this money goes on allowing of services in support of franchisees of this system ( preparation of the forces, advisors etc. ) . Franchisees bring a name of the franchise on the new market. Each separate franchisor receives immense advantages in all market because the franchisee, rapidly widening in the new market and making investings in development of this concern in new metropoliss, make a broad web of concern on which development the franchisee ne’er would hold money. The addition of measure of paid payments rapidly and efficaciously allows the franchisor to develop in the market.

With opening the new endeavors consumers find out about a merchandise and services more. It is really of import, as the new franchise becomes known in the market in procedure of allowing the services. Th

e legion franchise endeavors in the specific market unfastened economical entree to advertisement in mass media that does franchising known among the greater figure of consumers. Use of advertisement consequences in addition of gross revenues and the net income in each endeavor of franchise system.

For the franchisee:

The franchisee gets professional support from the franchisor. Such support helps him to avoid those errors which are done normally by other business communities. The franchisor preserves the franchisee from credence of incorrect determinations which could damage or in general destruct his endeavor. And at the same clip the franchisee ever remains the independent proprietor of concern. This independency means, that he ne’er will disregard from this work. The biggest advantages are dealingss between the franchisor and the franchisee. All stuffs and the support given by franchisors to single franchisees, are intended for support and elaboration of the importance of the franchise. In the list of such advantages it would be possible to name: stuffs, preparation and consulting. The franchise system gives the information which helps the franchisee to happen suited site for the endeavor to do its design and will be convinced that concern right maps. The franchisee it is non necessary to worry about the jobs originating at an initial phase because he has experience of the franchisor. After opening franchise concern the franchisee continues to have professional services from the franchisor on inquiries of day-to-day concern covering and selling. If there are jobs their first undertaking will look into up all given stuffs and manuals. But, nevertheless, can originate and specific jobs. In this instance the franchisee can name the franchisor and reference for the aid. Merely because there is such communicating between the franchisor and the franchisee, jobs of the franchisee can be solved with the aid of the skilled franchisor.

The franchisee ne’er will confront an unfastened aggressive competition. The franchisor defines to the franchisee district of concern covering. Boundary lines of this district are determined by conditions of the franchise contract. Receiving district, the franchisee efficaciously can develop the concern in the certain district. It removes menace of competition on the portion of other proprietors of same franchise. The franchisee receives the untwisted trade grade in custodies. Merely the franchisees, working in system of the given franchise, have the sole right to utilize a trade grade of the franchisor. To the minute of gap of eating house, all in territory already know that it will render services on high a professional degree.

For the consumer:

The consumer receives an chance to utilize in the country merchandises and services of the known trade grade of the certain quality and in a unvarying monetary value.

The basic deficiencies of franchising consist:

For the franchisor:

To do the control of deals of the franchisee for the franchisor non so it is easy. You see franchisees are independent proprietors of concern. Quite frequently the franchisee will transport out fiscal frauds. Franchisors set up construction of payments for the given service, presuming as a footing involvement from a entire amount of gross revenues in each endeavor. Franchisees are obliged to give the study on a entire amount of gross revenues to the franchisor to specify the amount of payment for service. The franchisee can seek to conceal the amount of gross revenues and to give the uncomplete study to undervalue a payment to the franchisor. If the franchisee does non transport out Torahs of franchise concern, the franchisor can non complete the relation with him. The franchise contract defines a nature of dealingss between the franchisor and the franchisee. The franchise contract provides a figure of the places protecting the franchisee. These places provide impossibleness for the franchisor to end the contract with the franchisee. If any pupil severely conducts the concern it will project a shadow on all beautiful system. And many consumers perceive each franchise endeavor as a portion of one circuit of the endeavors working under a unvarying trade grade. Principles of concern of the franchisor represent a trade secret and organize a footing of success of franchise system. The franchisee gets entree to commercial secrets, being trained on the plan of the franchisor. And though the franchise contract forbids the franchisee to unwrap the similar information, all the same it happens. It is hard for franchisor to fight with it. At any phase the franchisee can number, that franchise dealingss impose on him excessively large limitations and as a consequence to lose involvement to this concern. Having terminated the contract with the franchisor he, likely, will desire to open own concern which will stand for a direct competition to the franchisor. The organisation of franchise system – really large duty before ain concern. Franchisors really carefully should choose business communities whom they want to sell franchises. After the franchisee to go a portion of system, the franchisor should detect of how there are his personal businesss. The franchisor rapidly should be able define going ripe jobs and instantly to do of the determination. The franchisor should back up uninterrupted communicating with the franchisee and happen out from him about new thoughts and determinations of already bing jobs. Working together with the franchisees, franchisors can avoid jobs which could set a serious loss to all system.

For the franchisee:

Franchisee can do the offers, but they can non alter system. Franchisee should detect regulations of franchise system. These regulations are formulated in the franchise contract and all franchisee without exclusion should transport out them. In add-on to the franchise contract the franchisee should follow the particular regulations refering day-to-day operations in concern and usage of a trade grade of the franchise. It is all it is described in the plan of preparation of the franchisor. Such limitations can concern working hours, boundary lines of district, mixture of a merchandise and the services offered to the consumer. The franchisee should hold to acceptance of these limitations prior to the beginning of action of the franchise contract. The franchisee should specify a degree of support before the contract will get down to run. Insufficient support on the portion of the franchisor undermines force of franchise system. The possible franchisee attentively should familiarise with work of franchise system, whether to specify the franchisor gives necessary support on direction or carry oning plants. The franchisee is obliged to collaborate with others franchisees, he wants that whether or non. Though the franchisee represents the independent proprietor of the concern, he is the of import nexus in a web of proprietors of the franchise. Each separate franchisee is comrade on concern. Not looking on that franchisees give on the market an indistinguishable merchandise and services, they are non rivals. Can go on so, that the franchisor will declare bankruptcy that can ensue in sale of the franchise or its revocation. Before subscribing the franchise contract the pupil should put to death a figure of necessary processs if he cares of the hereafter concern. The possible franchisee should familiarise with the stuffs given by the franchisor really carefully. The possible franchisee should run into other franchisees of this system and to specify, how the franchisor carries out the promises on allowing services. Whether the franchisee should happen out is the franchisor a member of local association of franchising. If yes, the franchisor should transport out demands of the Ethical Code of Association. As it is necessary to see local Association of Franchising more discoveries out about the franchisor.

For the consumer:

Restriction of a competition – absence of a competition inside a franchise web owing to the incorporate monetary value and commercial political relations and granting by the franchisee of sole rights on district served by them. An chance, in instance of unjust public presentation by the franchisee of the responsibilities, impairment of given merchandises or services.

Literature

1. & # 1056 ; & # 1099 ; & # 1082 ; & # 1086 ; & # 1074 ; & # 1072 ; & # 1048 ; . & # 1042 ; . & # 1060 ; & # 1088 ; & # 1072 ; & # 1085 ; & # 1095 ; & # 1072 ; & # 1081 ; & # 1079 ; & # 1080 ; & # 1085 ; & # 1075 ; : & # 1085 ; & # 1086 ; & # 1074 ; & # 1099 ; & # 1077 ; & # 1090 ; & # 1077 ; & # 1093 ; & # 1085 ; & # 1086 ; & # 1083 ; & # 1086 ; & # 1075 ; & # 1080 ; & # 1080 ; , & # 1084 ; & # 1077 ; & # 1090 ; & # 1086 ; & # 1076 ; & # 1086 ; & # 1083 ; & # 1086 ; & # 1075 ; & # 1080 ; & # 1103 ; , & # 1076 ; & # 1086 ; & # 1075 ; & # 1086 ; & # 1074 ; & # 1086 ; & # 1088 ; & # 1099 ; . & # 8211 ; & # 1052 ; . : & # 1057 ; & # 1086 ; & # 1074 ; & # 1088 ; & # 1077 ; & # 1084 ; & # 1077 ; & # 1085 ; & # 1085 ; & # 1072 ; & # 1103 ; & # 1069 ; & # 1082 ; & # 1086 ; & # 1085 ; & # 1086 ; & # 1084 ; & # 1080 ; & # 1082 ; & # 1072 ; & # 1080 ; & # 1055 ; & # 1088 ; & # 1072 ; & # 1074 ; & # 1086 ; , 2003.

2. & # 1052 ; & # 1102 ; & # 1088 ; & # 1088 ; & # 1077 ; & # 1081 ; & # 1071 ; . & # 1060 ; & # 1088 ; & # 1072 ; & # 1085 ; & # 1095 ; & # 1072 ; & # 1081 ; & # 1079 ; & # 1080 ; & # 1085 ; & # 1075 ; . & # 1057 ; & # 1055 ; & # 1073 ; . : & # 1055 ; & # 1080 ; & # 1090 ; & # 1077 ; & # 1088 ; , 2004.

3. & # 1047 ; & # 1077 ; & # 1084 ; & # 1083 ; & # 1103 ; & # 1082 ; & # 1086 ; & # 1074 ; & # 1044 ; . & # 1053 ; . & # 1060 ; & # 1088 ; & # 1072 ; & # 1085 ; & # 1095 ; & # 1072 ; & # 1081 ; & # 1079 ; & # 1080 ; & # 1085 ; & # 1075 ; . & # 1048 ; & # 1085 ; & # 1090 ; & # 1077 ; & # 1075 ; & # 1088 ; & # 1080 ; & # 1088 ; & # 1086 ; & # 1074 ; & # 1072 ; & # 1085 ; & # 1085 ; & # 1099 ; & # 1077 ; & # 1092 ; & # 1086 ; & # 1088 ; & # 1084 ; & # 1099 ; & # 1073 ; & # 1080 ; & # 1079 ; & # 1085 ; & # 1077 ; & # 1089 ; & # 1072 ; . & # 8211 ; & # 1052 ; . : & # 1070 ; & # 1085 ; & # 1080 ; & # 1090 ; & # 1080 ; – & # 1044 ; & # 1072 ; & # 1085 ; & # 1072 ; , 2003.

4. & # 1063 ; & # 1077 ; & # 1088 ; & # 1077 ; & # 1087 ; & # 1072 ; & # 1085 ; & # 1086 ; & # 1074 ; & # 1072 ; & # 1045 ; . & # 1040 ; . & # 1060 ; & # 1088 ; & # 1072 ; & # 1085 ; & # 1095 ; & # 1072 ; & # 1081 ; & # 1079 ; & # 1080 ; & # 1085 ; & # 1075 ; & # 1074 ; & # 1056 ; & # 1086 ; & # 1089 ; & # 1089 ; & # 1080 ; & # 1080 ; : & # 1087 ; & # 1088 ; & # 1072 ; & # 1074 ; & # 1086 ; & # 1074 ; & # 1086 ; & # 1081 ; & # 1072 ; & # 1089 ; & # 1087 ; & # 1077 ; & # 1082 ; & # 1090 ; . & # 8211 ; & # 1052 ; . , 2005.

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