10 franchising trends over the past 10 years
Experts predict a tenfold increase in franchised points by the end of 2025. Is it real? In order to answer this question, you need to look at the experience of the past 10 years. Namely: what happened over the years, what was acceptable and demanded before, and what today, and how the franchising market will develop in the near future.
Over the past 10 years, the franchising market has grown by almost 5 times. In 2017, about 1700 franchise concepts (brands) were presented on the Russian market, and the number of franchised points exceeds 50 thousand. For comparison, in 2007 the number of franchised concepts was no more than 300, and the number of franchised points was only 9.5 thousand.
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Of course, such growth rates of the Russian market are impressive, however, if we take the USA as an example of a state that is a world leader in the number of jobs created in franchising enterprises, as well as in the number of companies operating under the franchising model, then in this country the number of franchising concepts in 2 times more than in Russia – 3800 pieces.
In addition, more than 40% of all sales in the world are carried out through a franchise system, and this model is successfully used in 80 countries where franchise companies create from 5 to 15% of gross national product. These data suggest that, despite the active development and annual growth of the franchising market in Russia by 10-15%, it has great potential for further growth.
Of course, a lot has changed from 2007 to 2017: from the point of view of the attitude of managers to franchising and their awareness of the essence of this model, the variety of concepts and formats, the most popular areas in franchising, the relationship of franchisees and franchisors, the legal component of business and much more.
In particular, there appeared strong market players who, in 2007, had just begun to develop their business according to the franchising model, and today they had turned into large retail chains, and their franchised programs were recognized as one of the most attractive for partners. So, in 2017, the Helix Laboratory Service celebrates the 10th anniversary of its franchise network, which over this period has grown more than 50 times: from 5 to 265 retail outlets. Having extensive experience in this area, Helix analyzed the franchising model in Russia over the past decade and identified 10 interesting trends – as it was before and what has changed now.
Trend 1. Business is much more aware of franchising.
According to NAFI statistics, more than half of the entrepreneurs surveyed have a general idea of franchising and have heard something about it (53%). Another quarter of respondents (26%) – well know what franchising is. Two-thirds of managers informed about franchising (65%) were able to correctly characterize the essence of doing business according to this scheme. It is noteworthy that they correctly understand what franchising is, mainly entrepreneurs engaged in the wholesale and retail trade, as well as in real estate or construction.
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Almost half of the business representatives (45%), who are aware of franchising, believe that working in franchises in Russia today is beneficial for entrepreneurs. The main advantage of such a business was the ability to work on behalf of a well-known brand and a well-established business model, as every third entrepreneur said. Among the most serious shortcomings include the presence of a large number of restrictions on the part of the copyright holder, as well as the high cost of franchises.
Of course, this is a positive trend, however, against the background of these changes, the number of “pseudo-franchises” has significantly increased. We are talking about companies that do not have their own points or have one or two points, but at the same time offer to buy a franchise from them. Here, the careful selection of a partner by the franchisee is very important. In order not to be deceived by an unscrupulous frachiser, it is better to personally verify the authenticity of everything that the franchisor voices: come to the head office of the company and talk with employees who will accompany your business, talk with existing franchisees, visit existing points and production sites of the company.
Such a visit will give a clear understanding of the real state of affairs of the franchisor’s business, which is much more valuable and practical than all the beautiful presentations and phone phrases. If the company is just starting its business, then you need to be especially careful because the franchise is essentially a tracing-paper with a successful business model, and it can become successful only by proving its effectiveness at least at 50-100 points.