TEXT 6: FRANCHISING

Franchising means granting a formal right to the manufacturer, wholesaler or retailer to produce or to sell the company's goods or services in a special area for a specified period of time. This way of doing business is widely used in the market economy. 40% of all sales in the USA go through franchising which makes $1 billion as annual volume of sales. These figures are presented by International Franchising Association. Franchising in Great Britain is supported by government. The banks give loans to businessmen, and the government guarantees 80% of the loan.

Purchase of a franchise is a simple way of starting business. Reliable scheme of doing business, a promoted brand, product of high quality - all these things increase chances of a beginning businessman for success. For a stable company it is a good way of expanding markets. These are great advantages of franchising.

According to Russian Franchising Association, the number of franchises in Russia does not exceed two dozen. In other words, it is not developed in our country.

History of franchising in Russia dates back to 1993, when Baskin Robbins sold the first franchise in our country. Later, some Russian franchises were sold, among them a chain of shoe stores "Ekonika", fast food "Rostics", "Teremok", "Russkiye bliny", "Niam-Niam", filling stations LUKoil, TNK. But still we can't say that franchising is highly developed in Russia. Legal, administrative and financial problems are in the way of its development. Our laws don't operate the notion "franchising". One of the main things in the process of selling franchise is transfer of a brand name. According to Russian laws, brand name can't be transferred. Another serious problem is responsibility of subsidiary company. For example, if franchisee in Siberia violates standards of franchisor in Moscow, the consumer has a right to make a claim against low quality of goods or services. Open joint-stock company LUKoil which sells franchises for setting up filling stations, has special departments in the areas where its franchises operate. In order to develop this kind of business laws on franchising should be passed.

From the Internet