UDK 338.24
Kramar
I.Iu.
Ternopil
Ivan Pul’iuj National Technical University
THE NECESSITY OF FRANCHISING
DEVELOPMENT IN UKRAINE
Franchising
relations are an important and effective step in the modern terms of
strengthening the competition on internal markets and limited nature of
financial possibilities for enterprises using. It is explained by basis of
market economy - from one side there are large enterprises which give stability and
dirigibility, determine the level of scientific, technical and productive
potential, from the other hand there is small business which forms a
competition environment characterized by high mobility and provides
independence of enterprise initiative. Activization of small business is
important for Ukrainian economy. But in spite considerable possibilities of
small business in the process of becoming and functioning on the market
economic system, it has the weak parties related first of all to financing.
Therefore one of the ways to decide this problem is development of franchising in Ukraine.
Each
enterprise has to search the new forms of organization business, if it doesn’t
want to lose the positions at the market. Lately franchising became enough actual,
its distribution is predefined by market dynamism and market competition.
One of the conditions of franchising
development, as world experience shows, is a situation in which large
enterprises and wholesalers begin to drive small producers of the commodities
(services) out of market. Such conditions are observed in Ukraine. From one
side large enterprises start acting stably, trade marks are formed. On the
other hand, small enterprises can not always find the market niche or necessary
for its mastering capital.
Franchising will be helpfull in such
conditions.
Franchising
is that tool that allows small enterprises to increase the volume of sales
without substantial costs, provides their control on the operations of
commodity’s distribution, extends the markets of sale. At that rate a
franchisor usually gives a right or privilege to carry out entrepreneurial
activity in a corresponding form in a certain period and locally to the
individual or other company.
From
one side, the franchising system helps small enterprises to avoid the row of
obstacles with founding and functioning of own business, from the other - as a
corporate structure it limits activity of franchisee. Advantages from using
franchising prevail above disadvantages for small businessmen:
- for
the certain fixed payment franchisee has the opportunity to learn effective methods
of management, to promote the professionalism and competence;
- using
developments of the associated company, franchisee meets the customer demand
with consumer demand;
- the
proprietor of small enterprise has the opportunity to use advantages that are available only for
large companies;
- a
competition is relatively small (a franchise reduces the sharpness of
competition on a certain market segment).
The
disadvantages for franchisee are as follows:
- the limited
independence and enterprise initiative;
- the volume
of sales are set to the proprietor of franchise in accordance with the policy
of franchisor;
- in case of franchisor’s
bankruptcy or diminishing the popularity of franchisor;
- problems
of business success: in case of person’s death, whom the executed franchise is
on, some problems may appear with an inheritance for relatives if a franchise
foresees the obligatory sale of business.
For franchisor
there are such advantages:
- increase of market sales at minimum investments;
- an economy on material
encouragement of the hired workers: franchisee as a proprietor of the enterprise
has the personal incentive to maximize profit;
- getting additional
profit by supplying franchisee with uniforms, packing, equipment for halls
and offices;
-
franchisee, being directly near to the consumer, more precisely feels his needs
and wants, fluctuations demand and conditions of competition that is the source
of innovative ideas for franchisor.
Also there
are some disadvantages for franchisor :
- a decline of flexibility
of control system, complication in moving the trade place;
- impossibility of
replacement of "undesirable " franchisee, even if he manages
unskilfully, while the terms of franchise are not broken to them, he is
"inviolable";
- problems of recognition and
accounting: franchisor can not be sure that he gets a truthful report from about
franchisee activities;
- complication of control:
certain reputation of one franchisee is able to singe reputation of all network,
reflect upon a trade mark.
It
should be noted that the state of market of the developed countries
substantially differs from the economy of Ukraine. Basic differences are:
presence of permanent market relations, effectiveness and stability of
legislation, informative openness, developed market
infrastructure, financial stability, officially minimum of shade economy.
Franchising
is comparatively the new phenomenon in Ukraine, while in the industrially
developed countries it is practiced by centuries, providing the requirements of
society in different services. As a
modern process
of becoming
and developing of small business takes place in the conditions of sharp
limitation of financial resources of the state and local budgets, and also
absence of the effective system of financing, crediting and insurance of
entrepreneurial activity then an important value is acquired by establishment
of close co-operation of small and large enterprises with the aim of deciding
of general issues of their functioning.
Thus,
it was proved, that franchising can be founded in the different spheres of economic activity. Franchising relations in
Ukraine are mostly widespread in a public food consumption, retail business
food and unfood stuffs in the field of services. Unfortunately, today
distribution of franchising model among the enterprises of small business restrains temper the row
of barriers among which most influential are: instability of economy development;
absence of necessary start-up capital in majority of potential franchisees; problems which franchisees
face with getting credits; imperfection of the legislation concerning the development
of the market model.