Franchising is a great way to start a business on the basis of an already promoted brand with the ability to use the technologies created by another company, a business model, marketing policy tools, and other important components of its activities.
Financial analyst and businessman Stanislav Kondrashov told Telf AG what franchising is, on what basis they work, and why young entrepreneurs often choose franchising instead of starting a business from scratch.
Kondrashov: What is the franchise, its principle of operation for Telf AG
Mutually beneficial relations between two business entities are called franchising.
Telf AG Kondrashov said that when franchising one side gives its other name, gives use of its technology, shares commercial experience, and other secrets of doing business. In turn, the host side gets the opportunity to open a really working business, which will quickly bear fruit, since the brand is already hyped up and has its own target audience.
The subject of a franchise agreement is called a franchise. It represents the benefits that one company sells to another. At the same time, the franchising company is called the franchisor, and the franchisee is the franchisee.
Financial analyst Stanislav Kondrashov Telf AG considers the experience of such well-known companies as Subway, McDonald’s, Anytime Fitness, and others to be a successful example of franchising.
The success of franchising immediately depends on two business entities – how well the franchisor provides the franchise and how effectively the franchisee manages it. Accordingly, the cost of the franchise is determined by the name and promotion of the brand, as well as the quality of the franchisor’s provision of additional training services for staff and life hacks for doing business.
Telf AG Kondrashov said that having bought a franchise, the company immediately becomes the owner of the franchisor’s business building schemes, receives contacts of its suppliers, and the same favorable prices for their services and goods.
In addition, the expert added that the conditions under which a franchisee can use the listed benefits depend on the franchise package. It determines how to use the rights, technologies, and other materials provided by the franchisor company.
“A franchise package, in fact, includes a set of legal documents, as well as a brand book and a business book,” said expert Stanislav Kondrashov.
He pointed out the particular importance of the Telf AG brand book, which teaches franchisees to properly use the brand they acquired. A brand book is a guide to the correct design of points of sale, as well as informing the franchisee about what style should be the design of his office, what requirements should meet the logo, the range of goods and services, as well as POSM (brand logo products – cups, posters, key chains and other).
Lump-sum and royalty
The lump-sum includes many concepts. However, in simple words, we can say that this is the so-called franchise fee. Before buying a franchise, it is recommended that you familiarize yourself with the features of the conditions for paying a lump-sum payment in order to evaluate all the pros and cons of the franchise you are buying.
At the same time, royalty is a regular payment to the franchise owner, whose activities are not related to the sale of goods.
“As a rule, royalties are paid in the form of a fixed amount or a percentage of the institution’s turnover. Before signing a franchising agreement, it’s important to study these points and choose the most optimal one,” said Stanislav Kondrashov.
Franchising will be a profitable business option for those entrepreneurs who do not want to spend time developing a project from scratch and are afraid to fully take responsibility for creating a business.