Топик: Fanchising in Russia

Franchising - from the French for 'Free', is a method of doing business wherein a franchisor licenses trademarks and methods of doing business to a franchisee in exchange for a recurring royalty fee.

The term is commonly used to describe a wide variety of business relationships which may or may not fall into the legal definition provided above. For example, a vending machine operator may receive a franchise for a particular kind of vending machine, including a trademark and a royalty but no method of doing business.

In the US franchising falls under the jurisdiction of a number of state and federal laws. Contrary to what might be expected, there is no federal registry of franchising or any federal filing requirements for information. Instead, states primarily collect data on franchising companies and enforce laws and regulations regarding their spread.

Franchising is at least 150 years old. One early example resulted in the characteristic look of historic hotels (bars) in New South Wales, with franchising agreements between hotels and breweries. An American example was the telegraph system operated by various railroad companies but controlled by Western Union, or selling a certain make of automobiles in a car dealership.

Some people would argue that franchising (in a non-profit sense) goes back even further; science-fiction author Neal Stephenson pointed out a resemblance between franchising systems and churches (specifically the ones that proselytize) in his breakthrough novel, Snow Crash.

Modern franchising came to prominence in the 1950s with the plethora of franchise-based fast food restaurants, of which McDonalds is the first and most globally successful. Many retail sectors, particularly in the United States, are now dominated by franchising to the point where independently-run operations are the exception rather than the rule. As an example, the Sport Clips Franchise organization only opens company owned stores to test new marketing concepts or ideas. As a result, Sport Clips owns very few of the over 200 franchisee owned stores. There is much information on franchising online.

As practiced in retailing, franchising offers franchisees the advantage of starting up a new business quickly based on a proven trademark and formula of doing business, as opposed to having to build a new business and brand from scratch (often in the face of aggressive competition from franchise operators).

As long as their brand and formula are carefully designed and properly executed, franchisors are able to expand their brand very rapidly across countries and continents, and can reap enormous profits in the process, while the franchisees do all the hard work of dealing with customers face-to-face. See customer service.

In response to the soaring popularity of franchising, an increasing number of communities are taking steps to limit these chain businesses and reduce displacement of independent businesses through limits on "formula businesses."

Franchising is both an old and a new concept. The term from the French originally meant to be free from servitude. Its meaning in the context of present-day promotions is the opportunity for an individual to own his or her own business, even if he or she is inexperienced and/or lacks adequate capital. During recent years, franchising, as a type of business operations, has been expanding rapidly and entering into new areas of application. The most recent industry study estimates that franchised businesses accounted for $803 billion in annual sales in 1992. Retail (business format) franchising is estimated to account for 35% of total U.S. retail sales. More than 8 million people are employed by franchise establishments.

Franchising is a form of licensing by which the owner (the franchisor) of a product, service or method obtains distribution through affiliated dealers (the franchisees). The holder of the right is often given exclusive access to a defined geographical area.

The product, method or service being marketed is identified by a brand name, and the franchisor maintains control over the marketing methods employed, or assists the franchisee in the operation of the business.

In many cases, the operation resembles that of a large chain with trademarks, uniform symbols, equipment, storefronts and standardized services or products. The franchisor maintains uniform practices as outlined in the franchise agreement.

The International Franchise Association, the major trade association in the field, defines franchising as "a continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising and management, in return for a consideration from the franchisee."

Franchising has been described as "a convenient and economic means for the filling of a drive or desire (for independence) with a minimum of risk and investment and maximum opportunities for success through the utilization of a proven product or service and marketing method." The owner of a franchised business, however, must give up some options and freedom of action in business decisions that would otherwise be open to the owner of a non-franchised business.

In a way, the franchisee is not his own boss, because in order to maintain the distinctiveness and uniformity of the service and to insure that the operations of each outlet will reflect favorably on the organization as a whole and protect and build its goodwill, the franchisor usually exercises some degree of continuing control over the operations of its franchisees and requires them to meet stipulated standards of quality. The extent of such control varies. In some cases, franchisees are required to conduct every step of their operation in strict conformity with a manual furnished by the franchisor. In other cases, the franchisor may allow considerable latitude on the part of the franchisee.

In return for following the franchisor’s guidelines, the individual franchisee can share in the goodwill built up by all of the other franchised outlets bearing the same name.

A company that depends upon the successful operation of franchised outlets needs individual franchisees who are willing to learn the business and who have the energy for a considerable amount of effort. The franchisor can supply the other essentials for the successful operation of the outlet. Among the services the franchisors may provide to the franchise operators are: (1) location analysis and counsel; (2) store development aid, including lease negotiation; (3) store design and equipment purchasing; (4) initial employee and management training and continuing management counseling; (5) advertising and merchandising counsel and assistance; (6) standardized procedures and operations; (7) centralized purchasing with consequent savings; and (8) financial assistance in the establishment of the business.

The U.S. Commercial Service in Russia has identified the franchising sector as one possessing a significant potential for development and offering vast opportunities for U.S. franchisers. Growing domestic consumption and demand for high quality services in the country has led to an increase of interest in franchising. The popularity of American franchise brands and improved trade relations between the two countries in combination with positive macroeconomic trends and an improving investment environment in Russia have created the necessary conditions for successful market entry by U.S. franchisers.

While an interest in franchising has existed in Russia since the fall of the Soviet Union and the opening of a market economy, the real start of development of this sector did not occur until the mid 1990's. Initially, the unstable economic situation hampered market growth in franchising. Despite the adverse economic conditions, the sector continued to expand. The recent macroeconomic stabilization of the last two years has created conditions for more rapid growth in this sector. Furthermore, the state of entrepreneurial activities is increasing support and actively endorsing the development of this sector.

Both foreign and local franchisers successfully operate in the Russian market and are quite optimistic about opportunities for expansion. Although there are currently, fewer foreign than domestic franchisers present in the market, it is far from saturated. The number of local franchisers (and potential franchisers) however is not sufficient to meet the growing demand and with new market entries by foreign franchisers the competitive situation may quickly change.

In Russia, franchising is utilized in the restaurant business, printing and copying services, photo-shops, repair and maintenance services, body/health care and leisure services, retail sale (clothing and footwear shops, furniture shops, sport wear shops, supermarkets, gasoline stations), business management and other services.

Because of the specific time, when franchising emerged in Russia, it has not had an opportunity to develop and spread as widely as it potentially could in a more stable environment. The main impediments that have constrained market development could be summarized as follows:

– Legal environment was lacking clarity that would boost the development of the sector.

– Local businesses had very limited knowledge of the mechanisms and advantages of franchising.

– Until recently, the state did not undertake any significant efforts to support SME development.

– Cultural and psychological particularities of local business ethics made the idea of purchasing intellectual capital unattractive.

– The high degree of mistrust among businesses, and inadequate protection of ownership rights.

Unfortunately, insufficiency in the local legislation governing franchising created a situation of the complete absence of market statistics. The franchisers and franchisees preferred to register franchise agreements under various legal forms, such as a licensing agreement, or a sales contract. Consequentially such deals were not reflected in the books of the State Registration Chamber - a main source of statistical data on the Russian market. Thus no justifiable data reflecting the size of the market is currently available.

--> ЧИТАТЬ ПОЛНОСТЬЮ <--