Экономические науки/2. Внешнеэкономическая деятельность

Соломенко Ю.Л., Усачев А.А.

Донецкий национальный университет экономики и торговли им.М.Туган-Барановского

FRANCHISING IN FOREIGN TRADE

Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-French derivation - from franc- meaning free, and is used both as a noun and as a (transitive) verb. For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods and avoid investment and liability over a chain. The franchisor's success is the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.

However, except in the US, and now in China (2007) where there are explicit Federal (and in the US, State) laws covering franchise, most of the world recognizes 'franchise' but rarely makes legal provisions for it. Only Australia, various provinces within Canada, France and Brazil have significant Disclosure laws but Brazil regulates franchises more closely.

Where there is no specific law, franchise is considered a distribution system, whose laws apply, with the trademark (of the franchise system) covered by specific covenants.

Businesses for which franchising works best have the following characteristics:

1) Businesses with a good track record of profitability.

2) Businesses which are easily duplicated.

As practiced in retailing, franchising offers franchisees the advantage of starting up quickly based on a proven trademark, and the tooling and infrastructure as opposed to developing them.

Although there are franchises around products – Chanel and other cosmetics, to name the prominent – by and large, the franchises revolve around service firms. At the sub-$80,000 level, they are, by far, the largest number of franchises. These allow a business, combined with family time and a location not far from home. Some franchises are available for a few thousand dollars.

The following US-listing tabulates the early 2010 ranking of major franchises along with the number of sub-franchisees (or partners) from data available for 2004.It will also be seen from the names of the franchise that the US is a leader in franchising innovations, a position it has held since the 1930s when it took the major form of fast-food restaurants, food inns and, slightly later, the motels during the first depression. Franchising is a business model used in more than 70 industries that generates more than $1 trillion in U.S. sales annually (2001 study).[citation needed] Franchised businesses operated 767,483 establishments in the United States in 2001, counting both establishments owned by franchisees and those owned by franchisors:

1. Subway (Sandwiches and Salads | Startup costs $84,300 – $258,300 (22000 partners worldwide in 2004).

2. McDonald's | Startup costs in 2010, $995,900 – $1,842,700 (30,300 partners in 2004)

4. Hampton Inns & Suites (Midprice Hotels) |Startup costs $3,716,000 – $13,148,800 in 2010

5. Great Clips (Hair Salons) | Startup Costs $109,000 - $203,000 in 2010

7. Dunkin Donuts | Startup Costs $537,750 - $1,765,300 in 2010

8. Jani-King (Commercial Cleaning | Startup Costs $11,400 - $35,050, (11,000 partners worldwide in 2004)

9. Servo-Pro (Insurance and Disaster Restoration and Cleaning) | Startup Costs $102,250 - $161,150 in 2010

10. MiniMarkets (Convenience Store and Gas Station) | Startup Costs $1,835,823 - $7,615,065 in 2010

Franchising has grown rapidly in Europe in recent years, but the industry is largely unregulated. Unlike the United States, the European Union has not adopted a uniform franchise disclosure policy. Only five countries in Europe have adopted pre-sale disclosure obligations. They are France (1989), Spain (1996), Romania (1997), Italy (2004) and Belgium (2005).

The Code of Ethics of the European Franchising Federation is self-enforced in seventeen European states where their national franchise associations are members of EFF members, and UNIDROIT.

All formal disclosure countries are require to give “Contract Summaries” to be furnished, highlighting: the object of the contract, the rights and obligations of the parties, the financial conditions, the term of the contract.

Legal consultation is a must to enter and finalize the agreement(s) as it in all regions. Most often one of the principal tasks in Europe is to find retail space, not so significant a factor in the US. This is where the franchise broker, or the master franchisor, plays a significant role. Cultural factors are also significant as the populations tend to be homogeneous.

The best example of franchising it is McDonald's restaurants. A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion.McDonald's primarily sells hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinks, shakes, and desserts. In response to obesity trends in Western nations and in the face of criticism over the healthiness of its products, the company has modified its menu to include alternatives considered healthier such as salads, wraps and fruit.

In the conclusion I should say that franchising is the best practice for developing business model with great succes. McDonald's restaurants are found in 119 countries and territories around the world and serve 58 million customers each day. McDonald's operates over 31,000 restaurants worldwide, employing more than 1.5 million people. The company also operates other restaurant brands, such as Piles Café.