You can find a wealth of information, articles, and materials about the pros and cons of franchising in Russia, but what do we really get today? Unfortunately, many companies started promoting the franchise offer before they had been in the market for at least a year. So, what pitfalls in franchising you can meet, and how to choose the right offer to be provided by a bona fide franchisor? Let’s figure it out.

Unscrupulous franchising offers

I divide such offers into two types. For the first one, the entry business cost is either low or absent, as well as royalty. And investments often vary within $1700. This is done to attract entrepreneurs who are not ready to invest a lot, but really want to start their own businesses. The ambition of such companies is to show stability through the nominal development of the network. For the second one, the goal is, as a rule, to receive immediate benefits in the form of a franchise “front-end” fee. So this type of franchisor sells their know-how and it costs quite a bit of money.

The types of franchisors described above operate in several ways. Some are attracted by their “specialty”, and offer an unusual product or service, which has not yet been seen on the market or can be found, but not in Russia. Others occupy a competitive niche and having copied materials and visualization of online resources from stable and long-standing companies, they immediately begin to give a franchise on their behalf.

In a small business, there is a common situation when new players suddenly enter the market, claim that they have been successfully operating for many years, and offer the experience that usually takes years, and requires large investments in the franchise set. Due to the lack of long experience and practice, they are not able to give partners a working business model and high-quality promotion within the framework of competition. Thus, during the move towards a franchise model, such companies are characterized by a weak willingness to replicate. Among other things, such franchisors usually reduce the fees during negotiations.

At the stage of distribution of a commercial offer, their entry into the business is not inferior to competitors, so they force the buyer to get acquainted with all the offers on the market. Further, the price is reduced, motivated by promotions or current discounts. But let us think about it: intellectual property is constantly being formed in the process of development, improvement, accumulation of experience, the release of new advertising campaigns, development of channels, and interaction with partners. Agree, if the franchisor is ready to reduce the declared price for know-how, then the real value itself is hardly high, most likely it corresponds to a very low bar. Businessmen with experience understand this or those who plan in detail.

However, considering the current situation in the country, people have become much more careful about investments, and less willing to invest much in new projects. Therefore, a small fee plays a major role in the purchasing decision. A potential partner no longer thinks about what he is buying, he only sees that an interesting offer can be bought almost twice as cheap.

Franchisees often forget about guarantees in terms of legislation. In addition to the fact that the franchisor must have a registered trademark, he must register the franchise disclosure document by the Federal Institute of Industrial Property. In Russia, it is considered a Concession Contract (for the nominal transfer of the brand and know-how to a partner). This condition is regulated by Ch. 54 of the Civil Code of the Russian Federation, and only in this case, the contract becomes valid.

When future franchisees meet a low price, they forget to check what is offered in deeds. If you are promised the call center, do not be lazy and call there yourself to follow the client’s path. If you are promised to have been set up with Google Ads, pay attention to how the website will be promoted in your region. Unfortunately, in Russia, at the legislative level, the list of documents for the franchisee is not fixed, as well as there is no regulation on what an ideal franchisor should be.

So, a quality franchise is distinguished from a dummy franchise by many indicators. I will list below the main ones, the presence of which is minimal when buying a doing business:

1. Registered trademark.
2. Calculation of economic efficiency for the specific territory (a realistic business plan).
3. Franchise disclosure document, which will be registered with the Federal Institute of Industrial Property.
4. Analysis of the environment in a specific territory.
5. Prescribed technology, and know-how transferred by the act of acceptance in the form of a manual. It includes a complete description of the business processes associated with this type of activity, a set of mandatory marketing tools for its development, and all the necessary documentation for doing business.
6. An opportunity to consolidate a specific territory or geographical area where the franchisee can operate.
7. Developed infrastructure, which includes: a dedicated page on the website or the development of a landing page with basic filling and primary SEO optimization / call center / CRM or cloud systems configured for the business/analytics and data collection systems.
8. Competent support in the form of a personal manager (mentor) for project management and operational issues.
9. Brand-book.
10. Updated methodical manuals.
11. A set of documents for the implementation of the trade secret.
12. The variety of pieces of training.
13. A set of templates with all the documentation necessary for the work.
14. The Knowledge Base.

When a dummy franchise that does not meet the criteria shows its true “profitability” – the entire market suffers. Customer confidence is declining in franchises as such. By the way, I often meet very skeptical potential partners. Their confidence grows only after an impartial on what our options are. But not everyone can get there, the above-described market situation can completely discourage the desire to get involved with any franchise in principle. Regardless of the business sector, confidence in this business format is undermined.

Therefore, be careful when buying a franchise, there are many decent offers on the market. And such franchisors are struggling with the grenade to maintain the reputation of the franchise market, fulfilling their promises perfectly well!