Adelina Sakhapova: ‘Today the franchise market in Russia is focused on the development of the domestic economy’
An expert about dummy franchises, a deficit of commercial areas and prospects of Russian franchise
The franchise market in Russia is having a boom amid the exit of Western brands. Analysts expect over 3,000 organisations to start running in the country this year, excluding big marketplace pickup points. Despite all the turmoil related to the start of the special operation, the turnover of the Russian franchise market rose by 19% last year, while the number of brands under franchise did by 5%. Nevertheless, there are enough problems, mostly it is dummy franchises and a deficit of quality commercial areas. In an op-ed column for Realnoe Vremya, expert in the franchise market, Director of Fruk company Adelina Sakhapova tells us more about it.
Dummy franchises and a deficit of areas
The number of business projects that start to develop their own network by opening branches on the territory of their region, in Russia and abroad grows every year. Today there are 3,095 franchises in the country.
However, the franchise business still doesn’t have clear operation regulations and legislative basis. This is why the so-called dummy franchises often appear in the market, while an inexperienced franchisee chooses a crude project that cannot in fact give him or her any guarantees without examining this company’s history, its business model and experts’ opinions.
A shortage of quality free areas is another problem the Russian franchise market has faced today. Chain companies often have to limit their appetites due to this and lower requirements for the size of new spaces they are located in. Some in general switch from offline sales to marketplaces.
The Russian franchise market has colossally changed in these 30 years. Yes, there are still some companies that are packed accordingly traditional standards and then operate on the basis of documental reports, Excel tables it is sometimes hard for a neophyte to figure out or simply calling their partners. However, modern digital products are replacing this obsolete business model. Thanks to them, the interaction between franchise owners and franchisee becomes automatic and goes online.
New digital solutions easily and simply help any person to find out how a franchise product works. Easy-to-use interactive financial models come in handy, an online brand book is also gaining popularity, it is where a franchisee can download and use the necessary information. Training and support mostly shifts to a digital format. New partners of a franchise learn the basics of running a business, launching a project, while franchise owners can track the training process in real time. In other words, now there is no need in having a call to learn how the necessary materials are processed — the platform immediately illustrates that, for instance, a franchisee from such-and-such city got stuck at lesson two and he or she needs to be dropped a message, reminded.
Today automatic training is actively used inside franchise chains — a special online platform was created deliberately for this purpose to launch and manage franchise chains.
Whatever can be launched as franchise
It is not rocket science to start expanding a business. In fact you repeat and pass your experience. Whatever can be launched as franchise, any product — from a freshly roasted coffee cup to a big grocery store or a luxury beauty salon. The most important thing here is to have a will and understanding that a business is really successful, has a real profit while the product is in demand among consumers. Advertising also plays a role in the expansion because client don’t follow a personal brand but advertising sources. It is also important that a business owner be not an all-rounder who tunes everything himself or herself, talks with clients and sells.
As for the amount of investments in buying a franchise, it can start from zero and at times reach hundreds of millions — everything depends on the format. For instance, there are franchises in the format of an industrial park or large spa complexes where a lump sum payment is measured in billions of rubles. Such big projects pay back, of course, longer — from 50 years and more. Nevertheless, such franchises do exist, though there is literally a handful of them. When selling a franchise, an owner usually can receive money as a lump sum payment or royalty payments (a monthly payment of franchise for support). Whit the zero-rate purchase, franchise owners usually earn thanks to royalties or commodity supplies.
Entrepreneurs themselves cane expand a successful business with a franchise, but wrapper companies usually comes to the rescue in this issue. However, there aren’t many companies that can really wrap a business into a franchise well — experts can be counted on the fingers of one hand.
There are around 30 companies in Russia specialising in a business wrapping and selling franchises. And today Kazan is considered a citadel in this area — it is Neko-Franch, Franchising, Businessmens.ru, Franchising5 and some others. They have been dealing with packaging for many years now, this is why they have gained quite a big experience in this area and have a high rating among businesses developing their chains as franchises.
What is a franchise package? This quite a complex product consists of two parts. The internal package is materials that are handed over to a franchisee: the development of the support pattern of franchise points, information about the basics of running this type of a business that will help to understand the specifics and peculiarities, necessary documentation. Key marketing approaches are considered when developing an external package, a brandbook is created, a business plan and a financial model of a franchise are developed.
Guaranteed failure if you sit with your arms crossed
Businesses in Tatarstan also actively produce new players in the franchise market. Such chains as Chio-Chio hairdressers’, Lifehacket coffee self-service points, Hohoro vending devices, Tsekh restaurant, TsvetyMIKS flower shop and others have hundreds of branches in Russia and CIS countries come from the republic. And this year franchising in Russia will get a lot of new players.
Today Russia’s franchise market is focused on the development of the domestic economy — we are looking at the development of our own areas, not at the West. This is why Russian businesses are quite actively wrapped, more requests are received, so we expect a good rise in the number of new franchises.
The list of business cases that are in a higher demand includes foot outlet chains, coffee stores, legal service, beauty services. At the same time, there is no miracle recipe that will instantly make a profit — everything depends on the franchisee’s activity. Money won’t shower from the sky to the one who doesn’t put any effort. Those who follow clear instructions spelt out in the franchising package will anyway be successful. A failure is guarantee for those who will sit with their arms crossed and do absolutely nothing.
The author’s opinion does not necessarily coincide with the position of Realnoe Vremya’s editorial board.