Object-Oriented Business: How a Franchise Works
If you compare your business and franchise - the difference will be approximately as between using a third-party library or writing your own. Own brings deep moral satisfaction, third-party - works.
Example: According to the president of the Russian Association for the Development of Franchising from New Businesses, during the first 5 years of operation, only 14% of companies opened under franchises are closed for various reasons - against 85% of closed independent companies. UPD: there was an example from a detailed study in the US, but in the comments we pick the source, not everything is so rosy. In Russia, there is no normal independent statistics, but, as the specialized publications say, the situation is close to what franchising is experiencing for the second year eight times more often. And this, by the way, is well understood by banks: for example, they offer special soft loans for franchised businesses.
Pieces of our french book: fully prepared "code", which simply needs to be implemented.
')
But back to this object-oriented business model and its three main qualities: inheritance, encapsulation and polymorphism. Well, at the same time consider the rake , which we went. In general, franchising for business is about the same as WEB 2.0 for the Internet. Below is an educational program, why.
So, the franchisee is such a type of business, when you are given a business model, the right to use the logo and various materials and instructions (all together - the class), and you start to implement all this and follow the standards (create an instance). The easiest case is commodity franchises, when you just give goods at a discount that is not available to others. Then - a franchise, which gives the logo and brand. And, finally, most often a good franchise also gives a tested sharpened model that contains all the actions that lead to success. The model is, of course, the most valuable.
The franchise receives from the franchiser "DNA of business", that is, the step-by-step scheme already in force. From the side it seems that the main value in the transfer of a recognizable brand, ensuring the supply of goods and joint marketing, but in practice more than half of success depends on which business model is used and how much it adapts to the region. In Russia, franchising is only taking the first steps, since at the moment few people understand the value of all this.
Roughly speaking, a franchise is an algorithm of your actions that allows you to get a successful business as a result. Simply follow it - and success is guaranteed, if you do everything right. Of course, if on the one hand, the model is calibrated, and on the other, your hands grow from the right place.
On the other hand, for a parent organization, a franchise is a “black box” that takes a product and provides profit. This means that there is no need to put a manager there (after all, the best and insanely motivated manager is the one who runs his own business), there is no need to distribute any management resources and do not need to think about all the localization nuances. The management chain is shrinking - this is very important for the effectiveness of a large organization. The result is a decentralized network of nodes, where each node operates independently as part of a common strategy. This is very convenient: only a few people can manage a large company, working not with specific situations, but “modifying the code”, that is, the company's “DNA”. This is similar to the actions of units in the “Ender Game” - the commander gives a general strategy, independent unit commanders embody at their discretion.
With all this, the franchise should survive in any climate and in any conditions. The “interface” of the outlet may vary, but the overall essence remains the same. In some countries, for example, McDonald’s have a completely different menu - but they remain themselves, they use the same principles of choice of place, the same personnel policy, the same supply chains, and so on.
And further. It must be remembered that if you suddenly decide to leave the franchisee system, then you will have to wait for quite serious spending. For example:
In this case, the main problem is that if you give someone your brand, and it creates anti-advertising, for example, poor service, it interferes with the entire network.
If you rise to the level above the Moscow-Region scheme, and look at the Europe-Russia model, then a number of other magical topics will open. Firstly, there are franchises with and without representation in the country. Experienced fighters of this front are advised to work with those that without representation — because when the “smut” comes to visit you, you can find many differences in your attitude and the attitude of the owner of the brand.
Many modern models include high automation. For example, often in the clothes found auto supply goods. Imagine you are a lingerie store, for example - and you do not make an order, but simply pay for it. And you learn what to trade when you open the boxes that came to the warehouse. Again, not the fact that this is a minus, but unusual - for sure.
Russia is a rather attractive market for the USA now, many western franchises are coming to us. Why? Because their markets are not yet exhausted, and they “milk” them on the one hand. And on the other hand, it’s not their mentality at all, we need people who ate the dog for local work. The beauty is that you can quickly enter the market with a model, work out 10 years ... and risk dropping out of business when the company opens itself.
In Moscow, almost all shopping centers are now built, so the main vector of franchising development in the regions.
It may seem that it is enough just to write the basic principles of the franchise in the document - and everything will turn out. But no, in fact, there is much more work - and early distribution of franchises may not be a good idea.
The first thing you need is to test the viability of the model . We, for example, are developing our own effective retail network, and absolutely know how all the little things are solved in the stores of board games. This is the knowledge of a professional: we offer only that in which we have already felt all the rakes. Extreme specifics are very important - after all, it will need to be repeated by franchises.
The second is to provide the services of the center, the core of the system . In our case, this is the organization of procurement from hundreds of suppliers (including importers, that is, working with customs), consolidating the whole business in a huge warehouse, processing all documents, working with promotion throughout the country, and so on. The most difficult thing is to get good conditions from large suppliers: the better, the higher your experience and the greater the network.
The third is to make a fully understandable walkthrough . Two years ago we wrote a 100-page document, which described in detail how to search for people, choose games for shelves, advertise a point and so on. But after a while it turned out that everyone does everything in their own way. Having summed up the experience, we have already written a 300-page document, which describes each step. And a lot of applications have been made to it - for example, all documents for registration of an employee, samples of accurate estimates for the repair of a store, samples of letters for invitations and refusals for a vacancy, examples of successful and erroneous calls to the call center, outdoor advertising schemes. Even the wiring diagram of the speakers for music in the stores was also drawn. All this took almost half a year, but it was extremely necessary.
Understandably, various interesting tasks arose along the way. Part we decided, part - not yet. Here are examples of real problems:
The solution to each question is a good task for the developer. Somewhere you need to change the architecture, somewhere there is a beautiful mathematical solution, somewhere you need to use different hacks, somewhere you make crutches ... and it all rolls out into release on a highload system from dozens of stores.
For almost 5 years, everything has happened. We closed the shops (for example, in one of the topics someone wrote that our franchise in Volgograd uses not very ethical advertising with paint right on the walls of houses - we checked all the work and closed the contract). Some of them went off the net to their own business, having decided to run the business themselves - and were surprised to understand how difficult it was (by the way, some people came back). Shops passed from hand to hand between heads of franchisees, resold and so on. True, so far never inherited. Now a store in Kirov is being sold, for example, the owner Anton there realized that it was not very fun doing business in another city, being physically in Moscow, and he was already pretty sick of going back and forth.
Here it is. If earlier we recruited enthusiasts with glitter in our eyes, ready to open a new business, and were, in fact, a commodity franchise, now we are looking for people who understand how retail works and have business experience. But the gleam in the eyes is still a critically important criterion.
PS In the comments I can tell you in detail about different stories with franchises that I know, and at the same time discuss in detail the pros and cons (which is more useful in practice) of different approaches.
Example: According to the president of the Russian Association for the Development of Franchising from New Businesses, during the first 5 years of operation, only 14% of companies opened under franchises are closed for various reasons - against 85% of closed independent companies. UPD: there was an example from a detailed study in the US, but in the comments we pick the source, not everything is so rosy. In Russia, there is no normal independent statistics, but, as the specialized publications say, the situation is close to what franchising is experiencing for the second year eight times more often. And this, by the way, is well understood by banks: for example, they offer special soft loans for franchised businesses.
Pieces of our french book: fully prepared "code", which simply needs to be implemented.
')
But back to this object-oriented business model and its three main qualities: inheritance, encapsulation and polymorphism. Well, at the same time consider the rake , which we went. In general, franchising for business is about the same as WEB 2.0 for the Internet. Below is an educational program, why.
Definition
So, the franchisee is such a type of business, when you are given a business model, the right to use the logo and various materials and instructions (all together - the class), and you start to implement all this and follow the standards (create an instance). The easiest case is commodity franchises, when you just give goods at a discount that is not available to others. Then - a franchise, which gives the logo and brand. And, finally, most often a good franchise also gives a tested sharpened model that contains all the actions that lead to success. The model is, of course, the most valuable.
Inheritance
The franchise receives from the franchiser "DNA of business", that is, the step-by-step scheme already in force. From the side it seems that the main value in the transfer of a recognizable brand, ensuring the supply of goods and joint marketing, but in practice more than half of success depends on which business model is used and how much it adapts to the region. In Russia, franchising is only taking the first steps, since at the moment few people understand the value of all this.
Roughly speaking, a franchise is an algorithm of your actions that allows you to get a successful business as a result. Simply follow it - and success is guaranteed, if you do everything right. Of course, if on the one hand, the model is calibrated, and on the other, your hands grow from the right place.
Encapsulation
On the other hand, for a parent organization, a franchise is a “black box” that takes a product and provides profit. This means that there is no need to put a manager there (after all, the best and insanely motivated manager is the one who runs his own business), there is no need to distribute any management resources and do not need to think about all the localization nuances. The management chain is shrinking - this is very important for the effectiveness of a large organization. The result is a decentralized network of nodes, where each node operates independently as part of a common strategy. This is very convenient: only a few people can manage a large company, working not with specific situations, but “modifying the code”, that is, the company's “DNA”. This is similar to the actions of units in the “Ender Game” - the commander gives a general strategy, independent unit commanders embody at their discretion.
Polymorphism
With all this, the franchise should survive in any climate and in any conditions. The “interface” of the outlet may vary, but the overall essence remains the same. In some countries, for example, McDonald’s have a completely different menu - but they remain themselves, they use the same principles of choice of place, the same personnel policy, the same supply chains, and so on.
Why is franchising such a popular thing?
- There is a working business model, you do not need to choose an idea for a long time and carefully. Niche checked, you can go there. The fee for such verification is development within the framework of the franchise rules.
- No learning problems. The parent company usually gives the finished model and teaches how to work on it. True, there are limitations: it is unlikely that we will be able to retreat far from this model. What is not always bad.
- You can always look at the mistakes of other franchisors and take advantage of their joint experience. Learning will go faster than in doing business. This is like a good open source.
- There is no need to think about many things in working with suppliers: you have no problems with foreign economic activity, there is no question of cargo consolidation, very simple logistics and very simple organization of orders. In this case, the parent organization is able to "push through" suppliers, which opens up more opportunities for you than just great prices. This is like a framework.
- You are famous for the network: it opens the doors of shopping centers and gives optimal opportunities in negotiations on advertising, promo and other things. You do not need to prove that you are known and solid. Plus network advertising works for you. The strength of the franchisee in a single brand: you will have this brand, and you will be recognized immediately, without additional identification.
- You protect yourself from competition: a master franchise in the region will mean that at least one federal network will not come to you (and the arrival of such a network is a nightmare for many small businesses). For you to understand the scale, let me give an example: the arrival of the Fedset in the region is as if Google suddenly started making the same software product as yours. You can either have time to sell or go and quietly die.
3 "against"
- This is not completely your business: many refuse to franchise just because they want something of their own.
- You will need to comply with the standards of the franchise and support its processes. In practice, this means a fairly rigid set of requirements, which rather helps the business than hurts - but it is often perceived negatively. It looks like the general standards for writing code taken in a team.
- Most likely, you will not be able to relax: the plan usually involves continuous expansion for at least 2-3 years.
And further. It must be remembered that if you suddenly decide to leave the franchisee system, then you will have to wait for quite serious spending. For example:
- We'll have to abandon the trademark and try to develop your brand.
- It will be necessary to immediately remake the entire outdoor advertising, all the layouts in the store, flyers, sellers' T-shirts and everything, everything, everything, the rights to which belong to the franchise owner - otherwise they will come with official papers and not sickly fines.
- You will need a website, that is, to it - re-all the product photos, all texts, SEO and so on.
On the other hand, why does all this to the franchisor?
- There is a constant demand: in fact, every franchise is a customer.
- A large network means better conditions for suppliers and more opportunities to push the necessary solutions.
- A distribution channel of its own products appears.
- The question of personnel in the field is fully resolved.
- Very important: dispersion control appears. The centers are not at the top of the pyramid, but directly where solutions are needed. Each of the heads of the representative office knows which strategy is needed for what, and is able to intelligently adapt the model to the region. The company gets more flexibility and more speed.
- The business model is constantly improving thanks to smart and feedback.
- You can do great things with all other members of the network.
In this case, the main problem is that if you give someone your brand, and it creates anti-advertising, for example, poor service, it interferes with the entire network.
What are the moments in the "big" franchise
If you rise to the level above the Moscow-Region scheme, and look at the Europe-Russia model, then a number of other magical topics will open. Firstly, there are franchises with and without representation in the country. Experienced fighters of this front are advised to work with those that without representation — because when the “smut” comes to visit you, you can find many differences in your attitude and the attitude of the owner of the brand.
Many modern models include high automation. For example, often in the clothes found auto supply goods. Imagine you are a lingerie store, for example - and you do not make an order, but simply pay for it. And you learn what to trade when you open the boxes that came to the warehouse. Again, not the fact that this is a minus, but unusual - for sure.
Russia is a rather attractive market for the USA now, many western franchises are coming to us. Why? Because their markets are not yet exhausted, and they “milk” them on the one hand. And on the other hand, it’s not their mentality at all, we need people who ate the dog for local work. The beauty is that you can quickly enter the market with a model, work out 10 years ... and risk dropping out of business when the company opens itself.
In Moscow, almost all shopping centers are now built, so the main vector of franchising development in the regions.
How we did it
It may seem that it is enough just to write the basic principles of the franchise in the document - and everything will turn out. But no, in fact, there is much more work - and early distribution of franchises may not be a good idea.
The first thing you need is to test the viability of the model . We, for example, are developing our own effective retail network, and absolutely know how all the little things are solved in the stores of board games. This is the knowledge of a professional: we offer only that in which we have already felt all the rakes. Extreme specifics are very important - after all, it will need to be repeated by franchises.
The second is to provide the services of the center, the core of the system . In our case, this is the organization of procurement from hundreds of suppliers (including importers, that is, working with customs), consolidating the whole business in a huge warehouse, processing all documents, working with promotion throughout the country, and so on. The most difficult thing is to get good conditions from large suppliers: the better, the higher your experience and the greater the network.
The third is to make a fully understandable walkthrough . Two years ago we wrote a 100-page document, which described in detail how to search for people, choose games for shelves, advertise a point and so on. But after a while it turned out that everyone does everything in their own way. Having summed up the experience, we have already written a 300-page document, which describes each step. And a lot of applications have been made to it - for example, all documents for registration of an employee, samples of accurate estimates for the repair of a store, samples of letters for invitations and refusals for a vacancy, examples of successful and erroneous calls to the call center, outdoor advertising schemes. Even the wiring diagram of the speakers for music in the stores was also drawn. All this took almost half a year, but it was extremely necessary.
Difficulties
Understandably, various interesting tasks arose along the way. Part we decided, part - not yet. Here are examples of real problems:
- The supplier does not have the goods, but our franchisee partner is not satisfied with us. The principle is very simple: domestic suppliers can throw out any surprises with availability, and even ensuring the stock of goods in the warehouse does not guarantee that there will not be a situation with the fact that the game will simply end everywhere in the country. In this case, it will be asked in stores. We will do everything we can (from a foreign supplier - we will even meet the first container from customs more often) - but the franchise doesn’t care. Someone decides this by automating the supply (as I wrote above, when the franchise owner does not even think about the product), someone leaves from a single consolidation center for goods, and so on. We are now working on another option while in beta.
- Could not solve with the simultaneous launch of the goods on sale. The idea is great - to start sales with a beautiful and noisy action all over the network on the same day. Like the movie premiere. The problem, of course, is in logistics. We also have Vladivostok, where to go by train for two weeks, and Yuzhno-Sakhalinsk, where even by plane it is not always possible to abandon in three days, and so on. With the same type of events, everything is not smooth either: so that you understand the scale of the network, this year, when a game store was held on Astrakhan on a green grass, you could not open the door of the store just on Sakhalin because it was covered with snow. But in general, except for the simultaneous launch, everything is solved.
- There is an actual problem with the settlement of share franchises. In short, a person can make N purchases in one city, and sell them in another nearby one. If at the same time the action is such that they give him a free game - obviously, the first city will owe it to the second.
The solution to each question is a good task for the developer. Somewhere you need to change the architecture, somewhere there is a beautiful mathematical solution, somewhere you need to use different hacks, somewhere you make crutches ... and it all rolls out into release on a highload system from dozens of stores.
For almost 5 years, everything has happened. We closed the shops (for example, in one of the topics someone wrote that our franchise in Volgograd uses not very ethical advertising with paint right on the walls of houses - we checked all the work and closed the contract). Some of them went off the net to their own business, having decided to run the business themselves - and were surprised to understand how difficult it was (by the way, some people came back). Shops passed from hand to hand between heads of franchisees, resold and so on. True, so far never inherited. Now a store in Kirov is being sold, for example, the owner Anton there realized that it was not very fun doing business in another city, being physically in Moscow, and he was already pretty sick of going back and forth.
Here it is. If earlier we recruited enthusiasts with glitter in our eyes, ready to open a new business, and were, in fact, a commodity franchise, now we are looking for people who understand how retail works and have business experience. But the gleam in the eyes is still a critically important criterion.
PS In the comments I can tell you in detail about different stories with franchises that I know, and at the same time discuss in detail the pros and cons (which is more useful in practice) of different approaches.
Source: https://habr.com/ru/post/203868/
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