How to buy a franchise in 2017

Buying a franchise can be a good decision for a novice entrepreneur. He has the opportunity to reduce his own risks, since he is acquiring a business model that has already been proven and proven to be effective.

The essence of franchising

Franchising is a special type of economic relationship in which one party (franchisor) transfers the other (franchisee) for a certain fee (royalty) the right to a certain type of business. In particular, the franchisee gets the right to work under the franchisor’s trademarks, as well as use the well-established business model.

Despite the fact that while the number of firms operating under the franchising scheme in Russia is relatively small, this line of business is becoming increasingly popular. There are several reasons for this trend.

The advantages of buying a franchise is the ability to use a business model that has been proven and tested over the years and has already proven its cost-effectiveness in practice. The franchisor can help with the difficulties encountered in doing business, in particular, to form the optimal assortment, provide an established logistics system, etc. Moreover, the franchisee has economic and legal independence.

Starting a franchise business, the entrepreneur already has a pool of brand-loyal customers, which helps reduce the company's marketing costs.

It is easier for an entrepreneur to plan his own business, because he can receive from the franchisor the amount of investment costs, as well as a detailed business plan.

How to choose a franchise

Before deciding to purchase a franchise, you must carefully analyze the franchisor’s offer. In the public domain a huge number of proposals for opening a franchise business are presented. It is initially necessary to determine the desired direction of work (trade, restaurant business, etc.), and then choose from the presented companies based on their own investment opportunities.

Further, the analysis should be built on the basis of assessing the market potential of a business idea in the region, as well as directly to the franchisor. At the first stage, it is worth considering the prospects of the idea based on the population, competitive environment, as well as the availability of appropriate retail space. Indeed, the franchisor’s declared indicators of profitability and return on business can only be relevant for large megacities, and in a small city such a business may not be successful.

Evaluation of the franchisor should be carried out comprehensively, based on a number of criteria:

- company experience in the market;

- the number of operating franchise enterprises, their financial indicators, the dynamics of opening and closing;

- the presence of a registered trademark;

- conditions for exiting the business;

- requirements for suppliers of materials and equipment - many unscrupulous companies seek to capitalize on this, offering obviously unfavorable, bonded conditions for the franchisee;

- what kind of support is provided by the franchisor.

Finally, it is worth evaluating the overall impression of communications with the franchisor.

It is also advisable to contact companies already working on this franchise in order to find out possible pitfalls associated with running this business and their difficulties.