Franchise business is quite common in modern conditions. The reason for this is a successful model, which involves such a format of doing business. A novice entrepreneur who is prone to making mistakes can successfully circumvent many of them if he joins the “right” franchisor. Ultimately, such a business can be very profitable.
Money to start
However, in order to run any franchise business, a down payment is required. It can include both funds for the business itself (going to purchase supplies and rent / purchase of equipment, premises), and a lump-sum payment, and royalties. Since these payments are not always acceptable for the entrepreneur himself, we will try to answer the following question: are there franchises without investments? And if so, how do they work, how do they differ from those offers in the market that require certain fees? We will deal with all this in order.
Types of payments
So, for starters, we will describe what is lump sum and royalties — those types of payments that the vast majority of franchise agreements provide. The first one must be made once at the time of conclusion of the contract. It is the starting one and is set by the franchisor at its discretion, depending on which franchise is involved. The second is a regular payment for the use of the rights that are provided by the franchise. Most often, royalties are paid monthly.
These payments are set by the franchise owner for various purposes. Firstly, it is his direct income from the brand and business model that he created. Secondly, the lump-sum payment and royalties make it possible to “separate” seriously-minded entrepreneurs who have the resources to do business in the model provided for by the franchise from people who just think that they want their own business. Also included here are those who simply by their financial capabilities cannot afford the further organization of a business.
In addition to the lump-sum contribution and royalties, do not forget about the “standard” costs that will be spent on the organization of work, as mentioned above.
Franchises without investments are ...
Having learned what major payments a franchise buyer faces, you have one question: without what kind of investments do people seek a franchise? Indeed, on the one hand, we can talk about the so-called open franchise - a contract for the transfer of rights, which does not provide for the entry fee and further royalties. On the other hand, people may be interested in such a franchise business model that can be launched without start-up capital. This is a completely different business, which has its own specifics and characteristics. Therefore, he is endowed with both some advantages and disadvantages compared to the “classic” version of the franchise.
Investments from the Franchisor
One of the rather interesting schemes that many businesses are organized in is the franchise owner acting as an investor. Of course, in this case, the franchisor holds a kind of “competition”, highlighting the most promising from a large number of applicants and providing him with the means to develop his business. It may not even be money, but some kind of tools, depending on which area of activity is involved.
Such a franchise agreement does not provide for remuneration - as a rule, the absence of some fixed income encourages a person to work harder.This leads to the fact that his business is developing more actively, and the investment of the brand owner pays off faster.
Attraction of an investor by
According to a similar model, another franchise option can work without investments. The only difference is that in this case the investor is a third party who acts on the basis of their own commercial interest. Again, such a person should understand what risks he takes, what the consequences may be of the inexperienced entrepreneur working with his investments.
On the other hand, if we are talking about high-class support for such a business from the franchisor, we can talk about some significant results and the effectiveness of such a model. After all, just what every novice businessman (experience, knowledge and money) does not have, he is given a franchise seller and an investor. And the entrepreneur should show the approach to organizing the business, some personal qualities shown in the course of managing it. They determine how successful franchises are in Russia.
No down payment
There are proposals that do not provide for a lump-sum contribution from the franchisee. The policy of such a business may be different: for example, the franchisor plans to earn higher royalties; the business model itself is specific and requires significant investments at the start; or, for example, the franchise owner is the manufacturer and the main supplier of products, which is why it is beneficial for him to develop a network of representative offices of this brand. To find such a franchise, you should use the catalog of offers.
When opening a business using this model, you need to make sure how much royalties you will pay to the franchisor. Perhaps they really will be higher than those provided by similar business models in the same niche.
Franchise franchises
In addition to what has already been noted above, there is also a category of so-called open offers. These are franchise models that do not require lump-sum contributions and royalties. The peculiarity of cooperation is that you can work under any brand without paying an additional fee. The franchisee must make investments exclusively in the work of the business itself: purchase equipment, hire personnel, and find the right property for the activity.
This may be beneficial for the brand owner for the reason that it is in his interests to distribute the brand as quickly and actively as possible in a territorial sense. Some manufacturers work on a similar model. Again, for them the main goal is an active presence in the market. Open franchises without investments also sometimes do not require royalties. This means that the franchisor’s income directly depends on the volume of product sales, which largely compensates for the payment of royalties by the buyer. This is also called a "franchise without investment for implementation." Often distributors of mattresses, plastic windows, building materials, furniture and other products work on it.
Lack of investment in assets
Another interesting option for those who are interested in a franchise without investments (for the sale of certain goods and services) is a model in which there are no investments in assets. This refers to a business that operates without special tools and some expensive technologies. All that is required for an entrepreneur is the right to work under the designated brand and represent it on the market.
Such a franchise (reviews confirm this) can become profitable if its buyer finds the right approach to it. The scheme may be this: a franchise is bought, a couple of salesmen are taken, a small office and a telephone, after which the active process of finding customers begins, ringing “cold” databases, working with online advertising, and so on.As practice shows, such a model can be launched with minimal investment, although profitability can be high. Therefore, we can say that these are ideal franchises for small businesses, given the absence of a lump-sum payment and low royalties (or also its absence).
Catalogs of offers
In fact, there are quite flexible working conditions for certain franchises in the market. You, as a potential buyer, can make a choice in favor of a particular offer, focusing on some of your criteria. For example, they often show how a franchise works, reviews of its customers and people who have experience with it. For a more detailed analysis, you can search the network for comments from employees of the franchisor company and its customers in order to have a common idea about this business.
Today, the network presents specialized catalogs that have dozens of offers in different directions. Finding them is very simple - using search engines. They are free and relevant for the reason that they have collected tens of thousands of franchise options from different companies. You can choose what type of business you would like to open in order to receive information about various trademarks from one or another sphere. It also describes the conditions that contain franchises for small businesses.
Some proposals are focused on a specific city, some are valid throughout Russia - this, again, is an individual approach of a company. In catalogs, as a rule, indicate approximate conditions. Naturally, signing a franchise agreement, you will familiarize yourself with them again.
