“Franchising” is a special type of relationship between market entities, when one party (franchisor) transfers to the other party (franchisee) for a fee (royalty) the right to a certain type of business, using a business model and trademarks developed by it
That is, the franchisor, as the Rightholder of the trademark, “lease” the trademark and established business to the franchisee. Franchising relations in Russian legislation are regulated by a commercial concession agreement, when the copyright holder of a trademark, commercial designation, patent for an invention, etc. undertakes to provide the user for a fee for a certain period or indefinitely with a set of exclusive rights belonging to the Copyright Holder. However, franchising has its advantages and disadvantages. The main advantages of franchising include: - franchising can help the company purchasing the franchise avoid making major mistakes that can cost a lot of money; - integration into a well-known company is the key to successful negotiations with banks when obtaining a loan for business development, since franchising reduces business risks; - one of the important advantages of franchising is integration into the existing marketing and advertising system, which require large time and financial costs; - receiving a registered trademark for use also allows the franchisee to avoid wasting time and money and timely implement their business plan. Thus, the main advantages of franchising include: quick access to markets and obtaining bank loans, reducing business risks, providing support to the company when choosing a site, a well-known and trusted brand and range of services, joint advertising costs, and price advantages. However, franchising also has significant disadvantages: - dependence on a large company; - inability to influence the trade policy of the franchisor (the franchisee is forced to comply with the rules and restrictions in business established by the franchisor, even if they do not bring benefits to the business, for example, buy raw materials only from suppliers appointed by the franchisor) and influence marketing and advertising, but are required to take part in their payment; - often the franchisor sets strict conditions when leaving the business, a ban on opening competing companies for a certain period and in a certain territory; That is, before making decisions about purchasing a franchise, an entrepreneur must make a choice between the opportunity to reduce business risks and independence from the franchisor’s trade policy.
