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Franchising is a method of entrepreneurship through which an entrepreneur can unite with an already existing large chain.

The international Association of Franchisees (IAF) defines this phenomenon as: "... a time-lasting relationship in which the franchisor grants a legally protected right to engage in certain business activities, as well as assistance in the organization of this activity, training, implementation and management for a fee from the franchisee." There are various forms of franchising.

The choice of franchising depends on: the type of economic activity; the stability of the franchisor and its place in a particular market of goods and services; features of the local franchisee market.

There are three basic types of franchising - product franchising, manufacturing and business.

Commodity franchising is sometimes referred to as "product franchising (trade name)".

It is a franchise in the field of trade for the sale of finished goods.

Production franchising is a franchise for the production of goods.

In this case, the company that owns the manufacturing technology of a certain product sells raw materials for production to local or regional plants (for example, a bottling plant for soft drinks).

Business franchising is called "business format franchising".

In this method, the franchisor sells a license to individuals or other companies to open stores, kiosks or entire groups of stores for sale to buyers of a set of products and services under the name of the franchisor.

Corporate franchising is a modern form of franchise business organization, in which the franchisee operates not a separate enterprise, but a network of franchise enterprises using hired managers.

Conversion franchising - a way to expand the franchise network, in which the operating company independently goes to work under a franchise agreement and joins the system of franchise companies operating under the control of one franchisee.

To fully understand the principles of franchising, it is necessary to make a comparative analysis of those types of franchising that are currently the most common.

This is shown in table 1.1.

Table 1.1 Comparative characteristics of types of franchising Type of franchising Franchise type Dignities Disadvantages Commodity goods ease of use The limited scope of application, the narrow specialization of the franchisee Production technology/ source component high efficiency; easy control by the franchisor large initial costs for the acquisition of the franchise; strong dependence on the franchisor Business franchise business model the widest scope of application; quick adaptability to market conditions sometimes through the dimensional regulation of activities suppresses the initiative of the franchisee Conversion conversion reducing the cost of the budget by reducing costs the need to adapt the private entrepreneur to the dependent position Corporate a network of franchised companies accumulation of positive qualities of the above types of franchising, business diversification frequent mismatch of the franchisee's goals with the interests of the franchisor; slow response of the business to changes in market conditions The cash budget - a key component of the business plan - will determine all cash expenses, including franchise fees, working capital, cost of buildings, equipment and royalties.

Franchise fee (franchise fee).

It gives the franchisee the right to conduct business at a particular address or in a particular territory.

Depending on the franchise, this contribution can start from zero and go up to millions of dollars.

Working capital (working capital).

This concept determines how much money is needed for the purchase of inventory, payment of sales staff, rental payments, etc. as long as consumers do not start buying and pay.

The cost of buildings and equipment (building and equipment costs).

The entrepreneur can pay these costs in full or in part.

Some franchisors provide the franchisee with a lease, both the building and the equipment, thus eliminating the need for the entrepreneur to produce large initial costs.

Royalties (royalties).

They make up from 0 to 15% of profit.

In exchange for the payment of royalties, the franchisee may receive services such as advertising, financial reporting and management advice.

The rapid growth of franchising, which is observed almost all over the world, seems to continue.

However, it is very unlikely that the franchising systems of tomorrow will be completely identical to those that exist today.

In a rapidly changing economy and at a time when the idea of creating a single global market has become a reality, some internal aspects of the nature of franchising as such are on the verge of change.

One of the key factors that stimulate the growth of franchising is the reduction of the share of traditional production and its displacement by the service sector.

Franchising is particularly well suited for business