How franchising: the basic legal and business aspects

A franchise is a great way to make money. For example, you have a store in Kiev, and you go and open three in Odesa, Kharkiv and Lviv. On the ground for the work of those responsible, who bought the rights to the brand. You follow the process, remaining in the city, and make a profit: the more members, the higher the profit.

For such a scheme are many. McDonald's started with the restaurant in San Bernardino, and then established branches. Now they are 36 thousand in the world, and the company's profit rose to $300 billion a year.

Franchising is beneficial to all. Buying a franchise, an entrepreneur fast to market and makes a profit. He didn't need to think about marketing, procurement, training of the staff. In his hands is a product that is in demand. The business owner gets an additional source of profit, and his company develops. Today's article is about how franchising works, who is involved and how it earn. Let's start with terms.

Concepts, without which you will not understand anything

1. The franchisor and franchisee

Dmitry — the owner of the pizzeria "Don Corleone". Her business card — couriers, who for half an hour the pizza in any district of Kiev.

Dmitry turns to Peter. He wants to open a branch of pizzerias in Zhitomir. There's no one delivers pizza in half an hour. Peter wants to make more money. Bob agrees. Provided that Dmitry will comply with the terms of the franchise. He will give Peter the right to use a trademark or logo, marketing materials, design of points of sale, the name of the pizzeria, recipes and equipment, the personnel training system. Will help to establish contact with the caterer. But instead want to receive part of the profits. Now Peter is the franchisor, and Dmitry franchisee. They will work together.

2. Commercial concession

To sell the franchise, Dmitry and Peter are guilty to enter into a contract of commercial concession. In Civil law commercial concession — the same as franchising. For the contract of commercial concession is necessary to registered trademark. The contract shall be concluded in written form. Then be sure to register in the service for intellectual property, patents and trademarks. Without registration, the contract is invalid.

If, however, Dmitry is still not a trademark, then, is a comprehensive license agreement that applies to everything else that is Dmitry in his franchise: marketing materials, drawings, design, training system.

Typically, in such a contract specifies that the sign is on the Desk, and even a ticket number. Well, after Dmitry will receive a certificate for your trademark, then already is the contract of commercial concession.

The document gives Peter the right mirror to "copy" the business of Dmitry. Now he will have access to trade secrets of the pizzeria, and most importantly — finally learns how to deliver a pizza in 30 minutes.

3. Lump-sum payment

Starting compensation that Peter pays for access to the market under the brand name Vasin. In this contribution, as a rule, put advertising costs, employee training, rent, market research. The franchisee pays a one-time payment. What will this amount decides the franchisor.

There are franchise and no fee. But usually work not pizza, and manufacturers of consumer goods, cosmetics, clothes. The franchisee in this arrangement acts as a dealer under the brand name of the seller.

4. Royalty

A percentage of income, which Peter pays to Dmitry. This regular fee: once a month or quarter. Dmitry specifies the size of the fee in the contract. The most common size of the royalty percentage is deducted from the sales turnover. Turnover of all profits after Peter for the payment of salaries to employees, rental costs and other vital for the company expenses.

The royalty amount is usually from 1 to 5 percent. Peter pays the money not only for the use of the business model, but for the trouble. If something goes wrong, Joe will tell you how to fix the problem. If the pizza menu is updated — explain how to prepare new recipes.

And it so happens that royalty no? Happen. If the franchisor wants to attract more franchisees, you can exclude royalties from the contract. There are also hidden royalty. They are included in the cost of production, which the franchisor provides a franchisee. Often the lack of royalties was a bad sign. This means that after signing the contract, the franchisor doesn't want to help franchisees and aims — to make person in neska.

According to statistics, 25% of entrepreneurs have a vague idea of how the franchise: what you can and cannot do if they do. If they decide to go into the industry unprepared, waiting for their problems. Not to burn at the start, let's understand what rights you have. And what responsibility you take, starting to work on the contract of the commercial concession.

That may or may not franchisees

When you enter into a concession agreement, each of the parties has rights and obligations to your partner. In a typical contract, the duties of a franchisee looks like.

You can:

To use the trademark of the franchisor.

To use commercial information.

Get advice, instructions on conduct of business.

To work with a vendor of the franchisor.

To transfer the franchise contract sub (to unite their region with another franchisee). To disclose commercial information.

Not:

To change the image of the trademark, company name,

To conclude a similar contract with a competitor of the franchisor.

In practice, requirements may be even more. What they will be, depends on what kind of franchise you buy.

For extra points it's easy to burn. Sign a contract, not going into details, is later regret. Comes the x hour, and you promised that he didn't believe my eyes. Hence the first rule: to not make trouble, see each item under a magnifying glass.

1. Supplier selection

Common situation: the franchisor forces you to work with your provider. He trusts him and does not want experimentation on your part. The supplier, knowing that he is one with impunity lifts the price tag on their products. To go to another supplier, you can not.

Output: ask the franchisor to determine the quality standards. Agree that will show them to other suppliers and personally responsible for the result. If the franchisor is in any, ask for a guarantee that your price will not suddenly rise.

2. The prohibition of competition

Another case. Franchisee opens a store in the Mall. When the store begins to make a profit, the point of capture the franchisor.

— Wait, is that possible?

Yes, it happens. Your franchisor agreed with the owner of the shopping center and on the right of the owner of the brand calls for You to warm place.

Output: make sure that the contract was clearly spelled out: the franchisor may not compete with you in your territory. It is also important to point out that he has no right to sell the franchise to someone who works in your territory. Otherwise you run the risk of the premise and it at least.

3. Warranty support

The whole point of buying a franchise is that the franchisor advises You and gives instructions on how to run a business. Otherwise benefit from the franchise a little. It happens that halfway stops the franchisor to help the franchisee. Don't return calls, ignores emails. The case arises. Such a scenario is not uncommon, especially in contracts without royalties. It turns out that your franchisor is interested in the first installment, not the cooperation with you.

Exit: you and your mercenary team have the right to constantly receive the advice of the franchisor. The key word is constantly. Make sure that the contract is exactly what is written.

4. Compensation

Case fourth. The franchisor unexpectedly liquidating your business before the contract ended. For example, declaring bankruptcy. If this happens, you remain out of work. The main question in this case — compensation: will she or not?

Output: pre-specify in the contract a provision on compensation in case the business of the franchisor goes out the window. Ask them to write in the amount and order of payment that you can count on. If you do not, you risk losing money.

What are the rights of the franchisor

The selection of the franchisee headache. On unnecessary screening candidates can take weeks, or even months. The good news is that you are the king of the situation. You prepare the franchise agreement, designate the rules. To protect yourself from unreliable franchisee, you can set requirements before signing the contract. So do many companies that sell franchises. You hang a sign: don't like my rules — do not go to me. Now let's see what you can write in the contract. And what you can do before it is signed.

1. Screening unwanted

So you sell the franchise. As if from nowhere fifty franchisees in your soul. How to choose a reliable and adequate? After a personal meeting doesn't guarantee that in battle man is not done evil.

Output: you have the right to take the franchisee in any manner not contrary to law. Develop training courses with the exam. Spend a day of open doors. Impose a veto on people in dirty clothes. Any filter that you think is adequate, for example.

2. The choice of the facility

Imagine that you have a network of snack bars "Matador". You work in spacious bright rooms. Proud of the fact that at the cash register are not pushed by evil men. For you to go, because you have pure and nice. But you decided to sell the franchise and scared. Suddenly, the franchisee will want to save and open your precious Matador in a damp basement on the outskirts, where the boys in sweat pants take away smartphones from shkoloty?

Output: set clear requirements for the premises, which rents franchisee. I'm afraid the surrounding area — tell them your order. I wish that the light — specify this requirement in the contract.

3. Selection of employees

Let's say you believe that you are a normal person. Taught his work by your rules. Calmed down. But what about the staff who will not hire you?

To sit in the same city, and monitor foreign workers in another is not an option. To send his too.