Free franchise: Myth or Reality?

Many potential investors, especially not having a large amount of money, but the dream of a stable own revenues come across the network to the alleged "free" franchise. It looks such a term is very attractive, but we must bear in mind that the free cheese is only in a mousetrap, and franchised production of goods or services, one way or another, created by someone's great difficulty, like any business, which means that its value can not be zero. Similarly, it is impossible to get a more or less decent profit without investing a penny in the business. The conclusion is that an attractive offer either a hoax or is the word "free" is meant not just "zero" number of attachments.

It should be understood that the franchise requires a minimum investment for the organization of business even if you're selling a service, it needs to create a presenter her site, if the product - rent a room, buy the raw materials, to register the IP or LLC, hire employees, and finally, to advertise their sentence.

Another very important, so that you have the right to work under a certain brand, and very few people are free. In addition, the franchisor usually provides training for potential partners, and this is, again, the time and effort that must be paid.

Therefore, the "free" deductible usually means that the franchisee does not pay the lump-sum payment and royalties. Also, we can talk about the fact that these payments are small.

Even a simple franchise is not too recognizable brand is an independent business. And any business requires investments. Therefore, we recommend wary of those who offer no deductible investments - there are some pitfalls.

When the franchisee dealer

Such franchises are also called "dealer", as in this case, it is the role of the dealer and franchisee acts: wholesaler supplies its products under implementation. That is, the goods in this case always has the franchisor. However, he could create their own structural units, invest in them a lot of money, or simply to sell goods at wholesale prices. He also takes money for the right to sell this product - often without a certain image of the franchisor, which supposedly should significantly influence because of its recognition on the marketability of goods. From this perspective, the lawfulness of a lump-sum payment is uncertain. And if it is not, this franchise still can not be considered free: royalty, which is announced to be zero, in fact, laid one way or another in the wholesale price of the product - it is formed by the supplier. Thus, to conclude that the low cost and the more "free" franchise on the size of its lump-sum payment rather lightly.

In some cases, it should be understood that the lump-sum payment does have to pay for anything. For example, it is equal to 70 thousand rubles, which is quite a lot. But pay attention to the fact that for the money the franchisee gets from the franchisor X: complete practical training at the factory franchisor opportunity to ask questions to the masters, familiarity with the unique technology and the secrets of working with the product itself.

And there is another franchisor - the Y. Its lump-sum payment is announced only 15 thousand (or even zero), that is very attractive to a potential investor. For the money it proposes to transfer to the partner in the form of theoretical knowledge on how to organize the shop as his draw and correctly put the goods - and not a word about what the specifications for this product. As you can see, the difference is significant enough knowledge.

At the same time pay attention to the investment partner declared to start a business: in the case of the franchisor X is just a few thousand dollars, but the franchisor Y-voiced worth several tens of thousands, most of which will be spent on the purchase of goods for sale.

Obvious minuses "free" franchises

Thus, the "dealer" franchise, where franchisees, in fact, merely resell the goods owner, initially look quite profitable, but in the long run, probably not bring the owners a serious profit, unless the product sold is not known, every second person on the planet. Even if it is possible to make a good margin on the product, as a rule, such a business is easy to be a simple copy - and so soon in this environment will be quite competitive, and the franchisee profits will fall in proportion to the number of competitors.

Another minus was voiced above: the knowledge that the franchisor provides for a miserable lump-sum payment, is not likely to be of particular value and almost 100% do not carry on the unique technology of production of a product. Establish with them a unique selling proposition would be extremely difficult and, therefore, questioned the competitiveness of the business partner.

In addition, the franchisee is highly dependent on the dealer in terms of pricing policy - it has nothing to do with the prices established by the dealer. And if the dealer suddenly starts to inflate prices, both perish.

The conclusion from the above is as follows: one way or another, almost always free cheese is only in a mousetrap. Wanting to save on lump-sum payment, it has paid off: it is possible that instead of creating unique technologies are well sold product you get for your money and wholesaler of general knowledge, which is at the root override your desire to earn a decent amount of money.