What is a franchise in business?

People who have ever faced insurance know that is a franchise of .

But many do not even realize that this term exists in other areas: business, sport, media.

But the more extensive your knowledge of this or that concept, the easier it is for you to operate them and use them to your advantage.

The franchise has long and firmly established in our lives and if you do not know what it is, you risk being known as an ignoramus in an intellectual society, losing your money when choosing the wrong insurance, to stay out of business.

Therefore, we begin now to fill the gaps in education.

What is a franchise and why is it so useful to know what it really is?

Somewhere two years ago, my grandmother's neighbors( ordinary older people) got into a car accident( through their own fault).

All remained alive and well, but their old nine was slightly affected.

Naturally, the car was insured( avtotsivilki - an indispensable condition in Ukraine), but here, wanting to save, people have issued an auto-lock with a deductible of 10%.

Not only did my car have to be repaired at my own expense, so also pay these 10% of the insured amount that was counted to another participant in the accident.

I know that the daughter of my grandmother's neighbors then scolded my parents for having succumbed to the insurer's insistence and issued insurance with a 10% franchise.

Parents were justified: "They did not know, did not understand, these new inventions".

Is it a pity that the older people who flew in on a fairly large amount for them?

Certainly, it's a pity.

But "ignorance of the law does not absolve from responsibility."

Knowledge is power and if you hear an unfamiliar word, you should understand what it means, what promises you, will do harm or benefit, especially if it's a question of money.

I told you the history of the franchise in insurance, but this term is also found in other areas:

1. In business.

   This is an agreement according to which an entrepreneur receives from the franchisor the opportunity to use his brand, business model, infrastructure, assistance of specialists, etc. for his business.

2. In sport.

   In professional leagues in the US, most teams have names consisting of two words, the first of which is a geographical name, and the second is a franchise.

   For example: "Boston Braves", "Cleveland Rams", "Detroit Lions" and others.

3. In the media space.

   Using characters or something else that has already appeared in the movie, computer game, book, comic book, etc., in another media product.

   This includes sequels, prequels, spin-offs and stuff.

If you only need knowledge about what a franchise is in sports and media space for general development, then what this term means in insurance and business needs to be discussed in detail, because this is surely useful for you in real life when you are thinkingover its improvement.

What is a franchise in business and where does it come from?

Many beginning entrepreneurs make serious mistakes that lead to slow promotion of the business and even - to its collapse.

But just imagine how much easier your activity would be if you could rely on the untwisted trade mark, get the advice of experienced professionals, start not from scratch, but from a practically finished platform.

Everything described is quite realistic if you know what a franchise is in business or, as it is often called, franchising.

It is believed that the franchise in business was first used by Isaac Singer, a developer of legendary sewing machines back in the middle of the nineteenth century.

He was the first to start a contract with distributors, according to which they were given the right to service and repair sewing machines for the USA.

But commodity franchising originated in the same United States of America only in 1921, when wholesale suppliers began to conclude agreements with retailers on the sale of their products.

Today franchising will not surprise experienced entrepreneurs.

They are well aware that, having decided on franchising, they maximize their chances of success, because they become part of a profitable, successful and promising business.

If you bought a franchise, then you do not have to guess, will lead your business to good profits and success or not, you already see the accomplishments of the one with whom you decided to conclude a franchise agreement.

How to buy a franchise in business and how to pay for it?

When you sign a contract with a franchisor( company or person from whom you purchase the right to use its trademark or product), you must fulfill all of its conditions.

The franchise is usually sold by large companies that have been working in the market for a long time and value their reputation, which means that they will demand from their franchisee( you, as a franchise buyer) not to reduce the bar on providing services or selling goods, which they themselves established.

Usually the franchise agreement in the business is very detailed and contains:

• rights and obligations of the parties:
• the amount you must invest in the project;
• corporate rules;
• detailed cooperation conditions;
• payment method;
• fines in the event of failure to perform the contract;
• recommendations on premises, terms of sale, customer service, staff form and much more.

This contract should be carried out rigorously if you do not want to lose your money and ruin your reputation in an entrepreneurial environment.

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A franchise in business, more precisely, the way of paying it is divided into 2 types:

1. Lousy - you pay the franchisor a one-time payment and for this you get the opportunity to use its trademark.
2. Royalty - payments that you transfer to the franchisor from the amount of each of your revenues are usually set at 5-15%.

Very often, those who sell a franchise in business use both methods of payment for it: both lump-sum and royalties.

Advantages of the franchise in business

The franchise in business is not accidentally in great demand among the franchisee and the franchisor, because both the one and the second receive a number of advantages from such cooperation.

The advantages that the franchisee gets:

1. He builds a business using a well-known brand that consumers trust.
2. Receives invaluable consulting assistance in the most difficult stage: launch and promotion of a start-up.
3. Get a loan for a franchise business is much easier than on any other.
4. You can develop a franchise business three times faster than when you start it from scratch.
5. You start working already prepared, because you are taught how and what you should do.
6. You know the amount of capital investments ahead, because it is indicated by the franchisor in the contract.
7. You do not have to spend much on an advertising campaign because the brand that you use is already known.

The franchisor also does not remain in the loser, because knowing what a franchise is and how to sell it profitably, it gains profit and additional opportunities to promote its business.

Disadvantages of the franchise in the business

Although it can not be said that the franchise in business has only advantages and is completely devoid of shortcomings.

Both the franchisor and the franchisee can get a number of problems instead of mutually beneficial cooperation and good profit.

1. The cost of a franchise can not be called small, so it is too expensive for small businessmen;moreover, the more famous the trademark you want to use, the more money you will have to pay.
2. By signing a franchising contract, you become a bonded person, who is told how and what he should do, and the execution of his orders is strictly controlled.
3. If you do not understand what you are signing in a contract, you can take on not very favorable terms of cooperation, under which you will have to give more than you earn.

But the franchisor risks his reputation, because if someone is not too scrupulous to fulfill the terms of the transaction, then customers will start to think badly about the trade mark as a whole, which can affect the profits not only of a particular institution, but the entire network.

Business franchise on the example of "Starbucks"

Perhaps the most popular example of successful franchising is the network of Starbucks coffee houses.

These establishments operate in more than fifty countries and only in Russia in recent years they have opened about 70.

The first country that bought the Starbucks franchise was Japan - here coffee houses began to open in the mid-1990s.

Today, nothing prevents neither Ukrainian, nor Russian entrepreneurs dreaming of their coffee, to sign a contract with Starbucks.

And despite the fact that the cooperation agreement with this brand differs from the traditional franchise, because you do not receive consulting assistance, benefits and other things, doing business using the trademark "Starbucks" is profitable.

How much is this transaction and how to get it, you can find out by contacting the official Starbucks representative in your country.

Terms of cooperation are not disclosed to everyone, and the contract is signed only after checking the franchisee individually.

To properly choose a franchise in the service sector,

listen to the recommendations in this video:

What is a deductible in insurance?

Another area where you often have to remember what a franchise is - insurance.

We can say that people have heard about the franchise in insurance rather than in business, because many deal with insurance companies, while only a few are involved in business.

What is a franchise in a hull and what are its conditions?

If a person first deals with an insurance company, then he will be offered several options for an insurance policy and during the conversation the word "franchise" will necessarily sound.

The person who hears it for the first time may hesitate to ask what it is, and as a result will conclude a contract that is less profitable for itself than it could.

A deductible in a hull is the part of the insured amount that you receive less in the event of an insured event.

That is, you voluntarily renounce it when you sign a cooperation agreement.

Where to get money for a business start-up entrepreneur?

The deductible in insurance can be:

• as zero( the insurance company fully covers your expenses);
• and make up a very impressive part of the sum of the insurance case.

Why do people agree to a franchise in insurance for more than 0%?

Because they want to save money, because policies with a zero deductible are much cheaper.

And most of the people who came to the insurance company( especially the car owners) are sure that the purchase of the policy is a conditionality, a forced measure imposed on the state by the state, without which it could be dispensed with, because they will try to do everything to ensure that the insured eventand has not come.

And if so, why overpay when you can buy the cheapest policy with a franchise.

If the insured event does not occur during the contract period, then you can really save.

But, if, for example, you get into an accident, you have a policy with a deductible of 30%, and the auto mechanic has deducted 30,000 rubles for repairing the car, then you will receive only 21,000 rubles from insurers.

So, did the unsecured ones cost to repair 9,000 rubles of your greed when buying a policy with such a franchise unprofitable for you?

Kinds of franchises in insurance

Insurance companies have been working in the market for so long that over the years they have managed to develop various versions of insurance policies so that even the most demanding client could choose from.

And, of course, the type and size of the franchise when choosing a policy plays an important role.

1. Conditional.

   The agreement prescribes the amount and, if the insured event does not exceed this amount, then you cover it yourself, and if it exceeds, everything is covered by the insurance company.

   For example, you have compiled a car insurance contract in which the conditional franchise is 1,000 rubles.

   You broke the taillight and in the service station repair work was estimated at 1,500 rubles.

   In this case, the insurer will cover your expenses, but if you were counted for replacing the tail lamp 900 rubles, then you would pay for everything from your pocket.

2. Unconditional is the amount that the insurer does not pay to you when an insured event occurs.

   For example, your unconditional deductible is 1,000 rubles, and the insured event is estimated at 3,000 rubles.

   So, the insurers will pay you only 2,000 rubles, and 1,000 will have to be reported to you.

3. High.

   It is present in contracts that are concluded for large amounts of insurance: from $ 100,000 and above.

   When the insured event comes, you are paid the entire amount immediately, but after you restore everything, you compensate the company for the amount that is equal to the size of the specified franchise.

4. Dynamic.

   It is often used by company owners to insure the health of their employees.

   For example, in the first insurance case you will receive compensation in full, at the second - at a rate of 70%, at the third - 50%, etc.

5. Temporary.

   It is indicated in units of time, rather than in percent or amount of money.

   For example - in months.

   And, if the insured event occurred before the specified time, then you do not get any money.

Here is the that is the franchise in insurance and business.

This knowledge is needed by every person, because they can be used with advantage for themselves.