This strange and incomprehensible to us, the term means only a special kind of business. Moreover, it’s a very efficient way for us. This niche is not so much in demand.
Franchising is an agreement based on the contract “franchises”. Its essence is that a large company entitles a small private company to run their business within a specified time frame and in the specified location.
Often this aid helps the entrepreneur to make the right choice shopping area, get a loan, etc. But the most fundamental thing that provides a “parent” company to his partner – is the ability to sell goods or services under its own brand.
During this entrepreneur pays an entrance fee and deducts a certain percentage of sales “parents”. In addition, he must acquire the necessary equipment from the “parent” company.
Togo, who has paid the franchisor for the right to conduct their business, called the franchisee.
Franchisor provides the franchisee a proven business idea, training, marketing, advertising, its experience, both positive and negative. He gives his business practices. It is for this reason work on the franchise agreement is better than having your own business. The franchisee gets an opportunity to open a new case and avoid many mistakes.
The leaders in the development of franchise systems in the U.S, the very first franchise in this country were the launch of sewing machines. In America, about 80% of new firms go bankrupt in 5-7 years. As for firms that are active on the franchise system, among them only 10% are going bankrupt.
Franchising is a powerful source for the formation of new independent companies. In 1991 in England, there were 432 franchise systems, in France – 600. In America from 1975 to 1995 the number of workers employed in franchising companies increased from 3, 5 million to 8 million.
In some countries, franchising is just beginning to develop. The most important companies operating on a franchising agreement include McDonald’s, Reebok and others.
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