What is a franchise? We tell in simple words: what is a franchise in insurance (Casco) and business (trade)

What is a franchise in simple words hard to tell. But we will try.

Franchise, or franchising has a single meaning. This is a model for creating a business: one company transfers another right to work under its own brand, to use the developed technologies, support and reputation.

Such a business model increases the chances of survival for a novice businessman. For serious companies, this is a reliable way to penetrate and quickly conquer the market.

What is a franchise in simple words

Suppose you decide to occupy a profitable niche in the market of pet services - to open a hotel for animals in your city. Hotels for cats and dogs provide pets with comfort and safety while their owners go on vacation.

Starting from scratch is risky: you need to conduct marketing research, create and promote a business, register a trademark. But attracted by a quick start, a close goal, the ability to shorten the path to first profit. Therefore, the idea arises to enlist the support of a well-known company and buy a ready-made business.

There is a founding company with an already popular brand. For you, this company is a franchisor. She transfers to you, the beginning entrepreneur, the right to use a profitable business model. After concluding a commercial concession agreement, you are proudly called a “franchisee” and you can enjoy all the advantages of a well-known brand.

At your disposal:

• Proven business scheme and marketing;
• recognizable trademark;
• well-established methodology for arranging a hotel, hygiene and disinfection of rooms, installation of round-the-clock video surveillance and anti-stress music;
• design design of the zoo hotel and zootaxi;
• selection and training of veterinarians, qualified specialists for supervision, care and grooming;
• customer base;
• business automation: IT technologies, information on the websites of the company and partners, setting up SMS and e-mail notifications for customers;
• privileges;
• production of branded animal carriers;
• advertising campaigns.

Concession is the format of a formal agreement on the transfer of exclusive rights for commercial purposes for a specified period. The agreement is drawn up on the basis of the law on the protection of intellectual property and contains information on the terms of payment of the franchise: lump-sum payment or royalties.

A lump-sum payment is the price of an injection into a franchising network, in other words, a lump sum payment. The value is calculated from the sum of the costs of the franchisor when creating and starting a franchise company. There is no single calculation - companies determine such principles individually, based on the expenses incurred or the expected profit of the franchisee.

Royalty is a periodic payment by the franchisee to the brand owner of the brand for supporting the business and managing the company. The franchisor entered the market with an idea, acquired a name, strengthened his position and allowed an unknown company to work under its brand and make a profit. Franchisees pay royalties for this opportunity.

In Russia, 3 varieties are most popular:

1. The most common form in the world of franchising is a fixed percentage of turnover. Paid according to the results of the company for a certain period of time.
2. The margin percentage is used for wholesale and retail trade in goods with different margins.
3. Fixed royalties are related to the cost of franchisor services, the number of customers, the area of ​​the premises.

The amount of royalties and the amount of the lump-sum contribution are fixed in the contract of commercial concession and are a means of compensation when using someone else's intellectual property to obtain personal income.

Interpretation in popular dictionaries

A large legal dictionary considers that a franchise is a right, within the framework of a commercial concession, to establish a commercial enterprise, as well as to sell goods and provide services.

The second value is used in insurance activities: this is one of the conditions of the concluded contract. The franchise removes from the insurer obligations to compensate for losses that did not exceed a certain limit in total. The value is set as a percentage of the sum insured or in absolute monetary terms.

From the point of view of the dictionary, the third meaning also matters: it is a company created on the platform of commercial concession.

A large modern dictionary interprets the concept as a paid right to use a popular trademark or trademark, granted subject to certain rules.

Another meaning of the term is applicable to insurance activities. This is an agreement that relieves the insurer of liability for compensation for certain losses.

Wikipedia explains that a franchise is a collection of goods that develop and strengthen a business using a popular brand and the reputation of the copyright holder.

Insurance Franchise determines the amount of damage caused during the insured event, and not payable.

Types of franchises and their description

Among the impressive list of franchises, 5 main categories are distinguished. The rights that the franchisee acquires after the conclusion of the contract determines the type of franchise.

1. Classical Or standard. A model of business relations, popular in European countries, which is difficult to take root in the Russian market, has the inherent characteristics of franchising: royalties, a lump-sum payment.It is characterized by the need to comply with strict corporate standards and regular business reporting to the franchisor. The rules and restrictions inherent in Western business are hard on Russian entrepreneurs with a “free” mentality.
2. Silver (ready-made business in a “turnkey” state) Franchise involves the process of opening a customized business. The franchisor maximally builds management and transfers it to the franchisee at the agreed percentage of royalties.
3. Free franchise. The most demanded type of franchise among Russians resembles a classic dealership. The difference is the complete freedom of the franchisee to implement the founder’s business idea.
4. Gold (master franchise). A businessman with a master franchise has the right to commercial franchising in the region or country. A variety of activities is attractive by sub-franchising: franchisees independently sell franchises or create firms under the brand name of a “personal” franchisor.
5. Banking. The most profitable in the Russian market. The franchisee opens a branch of the franchisor’s bank in his city. Financial and credit institutions in Russia are reluctant to trade franchises: demand exceeds supply.

Application of the term in insurance (Casco)

What is a Casco franchise? The term is familiar to all car owners. In insurance activity, this is the amount of the monetary equivalent of damage provided for by the contract upon the occurrence of an insured event, to which the policyholder is not entitled.

The value is expressed:

• as a percentage of the amount of compensation specified in the insurance contract;
• in absolute monetary terms.

By accepting the terms of the insurance deductible, the client receives a discount on the cost of the policy.

Franchise in CASCO has 2 categories:

1. Conditional or non-deductible. It is believed that franchise conditions are beneficial for customers of insurance companies, and much less suitable for insurers.The amount of damage in excess of the deductible is not deducted from the amount of compensation and is paid in full.This means the following. When the repair of a vehicle that has fallen into a frivolous accident requires a small payment within the franchise, the insurance company does not compensate anything. Suppose the franchise is 40,000 rubles. The insurer does not reimburse the car for a lower amount. If the damage is estimated at 45,000 rubles (an amount in excess of the deductible), the insurance company will pay the repair costs in full.
2. Unconditional (deductible). Most preferred type by insurers. When calculating compensation, such a deductible is necessarily deducted from the amount of compensation, regardless of the type of insured event or the extent of damage. The policyholder will receive compensation from his company on the terms of the insurance contract, with the exception of the amount equal to the amount of the unconditional deductible. In other words, if the contract provides for a franchise of 40,000 rubles, the policy payments will be made after deducting the specified amount.

Franchise in business (trade)

Depending on the vector of activity, franchises have a different direction:

1. Business format. Franchise in trade - This is the most common type of franchising business relationship. The franchisee acquires a turnkey business, including brand and trademark. A good example of this is mini-coffee shops and fast-food restaurants.
2. Commodity. The franchisee owns the right and ability to distribute goods from the manufacturer-franchisor. Famous franchises are car companies, clothing and footwear brands: Incanto, BabyArt, BAON, and the Eldorado household appliance chain. A merchandise franchise is often dispensed with mandatory payments and fees. The franchisee must buy a certain batch of franchisor products. In exchange, the latter provides the right to use the brand, organizes advertising campaigns.
3. Production. The company forfeits the right to manufacture and sell the goods of its sought after brand. An example is one of the popular franchises - Coca-Cola.

Directories on specialized sites represent business ideas in various fields:

• home baking, including national;
• manufacture of furniture, frame baths;
• unique technologies of stamped asphalt and patching;
• release of original equipment;
• production of auto chemical goods and car cosmetics, cleaning products.

Franchise business has many advantages. For beginning entrepreneurs, the initial experience “under the wing” of a well-known company is indispensable.

But there are also disadvantages. When deciding to become a franchisee, do not idealize the system. Most likely, tough regulations, a limited choice of counterparties, and an agreement on “non-competition” await you from such cooperation. Franchise or take a chance and start your own business from scratch - it's up to you.