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How to expand a business through franchising

28.02.2017 3858

Do you know that Kazakhstani franchising begins with the emergence of a plant “Coca-Cola”

Do you know that Kazakhstani franchising begins with the emergence of a plant “Coca-Cola” opened on sublicense of Turkish licensor of the same name brand? The plant was built in 1994, and the beginning of the so-called “qualitative presence” of a foreign company was characterized by opening their production in our country. Thus, the production of the famous producer of beverages became available not only in the form of trivial import, but in the form of national product, in the creation of which local employees of the company were involved. Since then, this kind of market relations in our country began to take on a vivid actuality. And frankly speaking, Kazakhstan is a leader in the field of franchising in Central Asia. If you have caught the idea to run your business through franchising, this article will help you to easily understand the process of the development of the franchise.

What is franchising and franchise?

Do NOT confuse a franchising with the franchise!

Franchising is a system of a business in which one side (the franchisor) transfers to another (franchisee) the right to use the technology of doing business in documented form, that is a form of doing business based on the sale of rights (franchises).

Franchise is the right to conduct business according to the technology of the franchisor and the form of replication of this system of doing business, which may include (or may not include) a limited right to use the trademark and/or service mark. In short, the franchise is the franchise package of documents and materials. The brand recognition of the business of the franchisor is desirable, but it is not an indispensable condition for the success of the franchise. For example: the number 1 franchise in the world SubWay (the restaurant chain) was founded by people who did not have ANY OWN restaurants - all the restaurants are franchisee.

What legal document do you need to refer to?

For the beginning businessman it is important to read yourself these documents as the Law of the Republic of Kazakhstan “On the comprehensive entrepreneurial license (franchising)” and the Law of the Republic of Kazakhstan “On trademarks, service marks and appellations of origin of goods”. They, in turn, focused on the development and state support of franchising activities in the Republic of Kazakhstan.

Is your business “mature” to run a franchise?

Answer this question honestly, because the further destiny of the enterprise, your reputation, your money, collective attitude depend on the readiness of your “child” to such a revolution.

If you:

- launched the company with a short term perspective

- are the owner of a non-profitable company

- as the head, conduct the business not openly, can notice a kind of reticence in yourself

- refuse to cooperate

- do not want to develop the business, using online support tools (feedback, remote monitoring partners), then franchising is not for you. But you can always buy a franchise which has already become a successful startup. In theory, it allows to recover the investments faster than when you start a business from scratch.

Moreover, now to buy the franchise you are allowed to get a government grant within the program “Business Roadmap”.

If you have a foundation that has its own results, it is quite possible that the franchise will become your second breath. If your company is not a giant market, but you have a successful experience, you are confident in their abilities and committed to your dream, then “Go ahead!”

How to start a franchise?

1. Register the trademark of your company

Every potential franchisor should identify and register objects of intellectual property: trademarks, patents, copyrights. How to do it?

1. The period of validity. The faster the trademark owner registers its trademark, the faster he will get the right of priority. Moreover, it is unreasonable to postpone the registration for a long period. The registration of the trademark begins from the date of filing with the Committee on the rights of intellectual property under the Ministry of Justice of the Republic of Kazakhstan. It gives the right to legal protection of registered intellectual ownership.

2. The registration authority. According to the Law on trademarks, the examination of the application for registration of a trademark is provided by expert organization - the National Institute of Intellectual Property of Committee on intellectual property rights, Ministry of Justice of the Republic of Kazakhstan (NIIP).

3. How the procedure of pendency of an application is conducted. The procedure of application and registration of a trademark may take a period of time more than one year. With a positive expert decision all the data about the new trademark is entered to the State register of trademarks. The data includes:

- the image of the trademark;

- the data on the holder;

- the list of goods and services in respect of which the trademark is registered;

- the country, number and filing date of the first application, if the convention priority is claimed;

- any other information relating to the registration of the trademark.

2. Learn more about the franchising model

Before creating a franchise, it is important to learn from the experiences of creating franchises, and even better with a person who is versed in franchising. Secrets in the establishment of franchises not so much, but they exist. “To make mistakes” is now very expensive, so before creating a franchise, read the source material and “walk around the market” of franchise.

3. “Estimate” franchising model for your business

The aim. When developing a franchise the franchisor should define the objectives of the implementing franchise program. The aim of the implementation of franchising can be the development of distribution network (product franchising), the increase in the value of the brand, its recognition due to the rapid opening of new businesses, advancing into new territories with the help of independent entrepreneurs and their resources, accelerate the development of network, etc. The franchisor needs to clearly define what for he wants the franchise and only then to start developing a franchising policy.                          

Is franchising suitable for your business?

Every enterprise is a unique organism, and to make the model of enterprise successful and profitable, each case requires an individual approach. Franchising is synonymous with successful, profitable business model, but not every profitable enterprise can stay successful after the transition to a franchise system. To get your business “alive” in the future, think about the following aspects: the uniqueness (know-how of your business), the registered trademark, the evolution of the company (does your company have a legend?), duplicative franchise (to be mobile and easy to describe and to duplicate, and therefore to sell), geographical duplicative, ready franchise package, professional staff and many others. These aspects make up the successful development of the franchise network.

4. Find partners

In fact, the most difficult thing is to find partners. Your project can be innovative, can be profitable, you may have a popular corporate blog with a large audience. But it does not always work in the direction of attracting a sufficient number of entrepreneurs. And even massive advertisement is not always fruitful.

There are popular ways of finding potential franchisees, which are widely used around the world:

1. Exhibition

2. Media advertisement

3. Advertising in own sales points

5. Make a contract with a partner

This stage requires no less attention and a juridical skill. Therefore, without the lawyers you cannot do it. Do not skimp on time and money. Resort to the services of several professional lawyers. Along with the contract develop the concept of franchising. All terms, policies of relations between the sides, the strategic goals of the franchisor, in short, show in the concept all those were not written in the contract. Avoid difficult legal terms for reading and understanding. Everything should be clear for you and your partner.

6. Make franchise package

The franchise package is a portfolio of documents such as a trademark, a service mark, know-how, in-house developments, trainings, a brand book, a legal package, etc.

7. Select the location of the distribution

It all depends on the type of business. If your company works online, you will be able to conduct your business almost anywhere, where there is the Internet. However, if your company works with physical goods, especially perishable, it makes no sense to develop in those regions where there is a difficult logistics. It is very important that the partnership take into consideration the interests of both sides and in any case you should prevent empty shelves in the stores of partners.

If you are the Internet project, then you need to take into account the specifics of the population. And our partners-entrepreneurs have to know these specifics; they are able to independently evaluate the potential of the project in their city. If they think that your project shows good results in their city, you can agree to the partnership. Moreover, as the founder, you do not lose anything at the start: all of the work to run the business is held by your partners.

8. If necessary, hire a staff and train them

Delimit the competence of the people who sell the franchise and those who serve and control the work of existing partners. Managers of the franchisor can idealize the situation and assume that for the convenience of working with franchisees they need, for example, a huge warehouse of substocking which provides access to all the sold positions. Better yet, provide installments for the franchisee, then they will be comfortable to work with. If such conditions do not exist, they can, subconsciously, sabotage the sale of the franchise, knowing that they have to work with this partner then, and the warehouse is not ideal.

And in the end of this long topic I would like to add that step-by-step actions in this covered material are just a drop in the ocean, and like any reservoirs, the business world has its pitfalls. But do not forget that success comes with tenacity and if you liked the idea, why not to use all of your resources to make it real?