Franchising – What is This Business Concept That Makes Everyone Think of McDonald’s all About Actually?

Franchising can be translated as the granting of a licence or the granting of a right to use a brand or concept. But this sounds more like a question mark than an answer. What is behind the concept that immediately brings names like McDonalds, Starbucks and Subway to mind?

Franchising can be described as licensing scheme or the allocation of the right of use of a brand and a concept. But this, too, sounds more like a question mark than an answer at first glance. Simply speaking: it's a concept where you have one company "lending" its business idea to others. The company that developed the business idea in detail and then tested and optimised it is referred to as the franchisor. The start-up that adopts the mature business concept from the franchisor is called the franchisee. The risk for the franchisees is thus manageable: they start their business with a concept that has already stood the test, benefit from an already established brand recognition and don’t need to develop any marketing concepts as they can use the ones that are already available. Moreover, they can share experiences with other franchisors as only shared experience is an empowering experience and learning from other people’s mistakes is not as painful as making the mistakes oneself. The franchisors can thus fully focus on what really matters: their own customers.

Those who reflect about franchising immediately think about names such as McDonald's, Starbucks and Subway. But you can also find franchising concepts in the sports and real estate markets, in skilled crafts & trades, or in the nursing agency industry.Being a franchisee usually means that you have a strong desire for self-employment and that the business risks are minimized for reasons which are rather obvious. The German Franchising Association (DFV) prepared a study which showed: those who start a company via a franchising model are more successful than independent business start-ups.

Franchising for independent traders

METRO, too, has been offering franchising models for small and medium-sized traders in a total of nine countries since 2010. The traders get the opportunity to manage a professional format under a recognized brand. In each of the nine countries the respective franchise brand has a different name - in Russia it is called Fasol, in Poland Odido. The store design, too, is different. This is of course attributable to the different preferences in the respective countries. Not only the brand serves as a guarantor for the end consumers’ trust, but also the choice, diversity and freshness of the products convince both traders and end consumers.That way, METRO supports one of the key target groups of its wholesale business: independent traders.The traders are not required to pay franchise fees. In return for the franchise they commit themselves to source a certain percentage of their products from the wholesaler METRO.

 

In Russia, the franchisors operate their retail stores under the franchise brand "Fasol". It is up to the traders themselves to decide how they want to set up their business. In Russia, you can find Fasol stores of all sizes varying between 60 and 300 square meters. Fasol stores are mostly found in residential areas. All stores are operated by independent traders. Their unique selling point: the proximity to their customers’ homes and a product assortment that comprises soft drinks, bread, dairy products, fruit and vegetables as well as wine and spirits. This means that the end consumers don’t have to drive up to one of the big supermarkets but can always find the most important products right on their doorstep.

Romania operates the franchise brand "La doi pasi" and has grown strongly over the past 12 months. Almost 300 new stores have been opened. They can be found in some of the most remote villages in Romania but also have a significant presence in Bucharest. The local Romanian team supports the traders who join the franchise model in transforming their businesses. Product ranges and assortments are examined, own brand products and their potential are assessed and, this way, the business of the small traders is developed further.

Poland operates the Odido brand franchise. With more than 2,200 stores, the Polish market is the most developed franchise market. And this even though competition in Poland is fierce. The franchisors do not only benefit from the large assortment, but also from solutions developed specifically for the Polish market such as the newly designed coffee or wine departments. They set the franchise stores apart from the competition and offer new highlights for the customers. The newly designed wine section in the Odido stores enhances customer frequency and, consequently, leads to stronger sales.


In this video, Edyta, an independent entrepreneur with meanwhile 4 Odido shops in Poland, explains which motivation drives the franchisors.