It is no secret that franchising consists of two main participants: the franchisor and the franchisee. The goals and objectives of these market players during the crisis are absolutely the same - to stay afloat, but the ways to achieve these goals are different.
For a franchisor in a crisis it is important to sell as many goods as possible at prices that are relevant at the time of the crisis. For the franchisee, the most important thing is to preserve the flow of customers, ensure the profitability of the enterprise and not lose out. From these two postulates the main contradictions of franchising are born during the economic turmoil of the market:
The main areas of franchising in Russia
What to do in this situation? According to the experience of past crises, and there were already at least three of them in the memory of the main Russian players, the market rotates: some franchised networks begin to develop actively, while others, on the contrary, “deflate” and lose ground. At the same time, franchisees do not disappear from the market, they migrate and balance between brands, choosing the optimal working conditions for their business.
It should be noted that in the Russian fashion industry there are two main areas of franchising:
Go to concessions
According to Reinhard Deppfer, President of EFTEC, in his speech at CPM from 25 on February 2015, most foreign franchisors are ready to make some concessions to their franchisees in the face of the crisis. For example, for each individual franchisee, in each particular city, all together or one of the following benefits can be provided:
Moreover, it is not at all a fact that each company will be ready to provide all these benefits to its franchisees. And even more so, it is not the fact that these privileges will be claimed by Russian franchisees against the background of economic sanctions, the existing inflation and the devaluation of the ruble.
Nevertheless, the proposals of foreign trademark holders are formulated and voiced, the situation with Russian brands is much more complicated. There are no explicit and open offers on the benefits and benefits of franchising in the media or on the Internet.
What privileges would be of interest to both the franchisor and the franchisee? This question is easier to answer from the perspective of a franchisee, since the franchisor, as a stronger player, must decide for himself which of the events and to what extent he is ready to implement:
1. The most important benefit is the release of money from the franchisee, namely:
In international franchising practice, a rule of return of up to 10% of an unrealized collection is accepted. This is not critical for the franchisor, since it has more opportunities to resell the rest of the collections to large discount centers. Either form full capsules from the goods of past collections and offer these products to franchisees from other regions, or, in the end, sell these leftovers in your own stock stores. In this regard, the offer of the manager of one of the well-known shoe brands to his franchisees is interesting - to exchange balances and form a pool of a new offer for buyers for the current season. It is not clear how this will look from the point of view of accounting, but, if desired and under the control of the franchisor, such an event can be carried out with high probability and effectiveness for the franchisee.
2. An equally important component is the franchisee's ongoing costs of maintaining the business. In this regard, the franchisee is interested in the following "concessions":
Against the background of austerity and the desire of each company to "survive", the provision of certain financial benefits for the franchisee seems disadvantageous to the franchisor. However, if we take into account that transport and advertising costs make up no more than 3-7% of the turnover and compare these costs with the loss of even one franchisee buyer, then it is better to make reasonable concessions than to lose market share. Moreover, the closure of the store and the removal of the sign is, in fact, the loss of the consumer audience of the whole city for a long time. Reopening a store in a “closed” city, especially in the current decade, is very difficult.
3. Training, anti-crisis measures and rallying - these factors are also important:
As a rule, franchisees are private entrepreneurs or small business owners. Most of them chose franchising not so much from the point of view of the economy, but according to their personal feeling: “like - not like”. Small regional stores in the crisis are much more difficult to understand what to do next? Right now it's time to turn the shoulder of the “elder brother” and show that franchisees are not abandoned, that they are important and expensive for each franchisor.
And what is important during a crisis for a franchisor? Of course - the opportunity to expand the network, and, accordingly, increase sales. Not all franchisors are ready to support their franchisees, not all have time to revise the product matrix, not all have approached the crisis in full combat readiness. Franchising is now in the stage of "chatter". Someone is losing the franchisee, someone is leaving the franchisor. It is high time to attract regional businessmen free from the unprofitable franchise into their team and expand the network of stores. The tools of attraction may be the simplest offers, for example:
Crisis is a time of opportunity. The future of the company depends on how the company uses these opportunities. As an example, I want to talk about the positive experience of running and developing a franchising business of the world famous TM HUGO BOSS during the global economic crisis of 2007 - 2010.
As you know, until 2008, HUGO BOSS did not develop franchising and only opened its own stores around the world. The global crisis negatively affected the financial performance of sales and brand activities. As a result of long work (preparation for the introduction of franchising and franchising sales took more than a year), during the 2008 - 2010 year, the brand opened more than 1 000 franchised stores, increasing its network size by more than five times and strengthening its market position.
At the same time, the press repeatedly slipped reports on the development of franchising with the brands Sportmaster, Detsky Mir, KOOKAI, ESPRIT, OVS, River Island and many others who tried to develop franchising business in Russia, but this experience was unsuccessful or unclaimed for various reasons .
In any case, franchising is a good anti-crisis tool for both the franchisor and the franchisee. Only this way of doing business requires careful preparation, development of a technology package and the effective work of the parent business, since franchising is a "cast" from your own retail network. It makes no sense to clutch at the franchise, like a straw, if the retail is “lame”, just as there is no reason to “strangle” the franchisee in his arms, since the franchise is a way to make a profit, not a charity.
For each company in the market there is only its own unique franchise recipe, which is developed in the "secret laboratories" and the bowels of each particular business. And if there are no such “alchemists” in your company, then I recommend that you better seek the help of consultants than get negative experience by learning from your own mistakes: save more time and minimize losses.
The structure of the Russian franchising market
by company origin
The structure of the Russian franchising market by type of activity
The structure of the European franchising market by type of activity
The situation of the franchisee in the crisis is perhaps the most fragile. Experts say that without additional anti-crisis expenses, many franchise holders this year will lose financial stability and curtail their business. Are franchisors ready to sacrifice their profits, take part of the costs for themselves, or increase the costs of helping their franchisees in order to maintain their occupied share in the Russian market?
As a survey among operators shows, the recession in the Russian economy, a sharp increase in the exchange rate and a decrease in the purchasing power of the population are forcing Russian franchisors to change their business strategy in favor of the franchisee.
Thus, the Alba shoe retailer launched a program for returning unsold goods at the end of the season, said Alba Franchising Director Mikhail Chernikov. Also, the retailer began to provide its partners with a factoring payment system that allows you to get a deferred payment for a percentage of the amount payable. The percentage itself is divided in half between the franchisor, the owner of the franchise, and the franchisee, its buyer. According to Chernikov, such measures were taken so that the partners had free funds.
Among other ways to help their partners were mentioned: reducing lump-sum contributions and royalties, transferring payments between the franchisor and franchisee from currency to rubles, refraining from price indexation, reducing the requirements for commercial equipment, and negotiating with landlords on the ground.
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