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Though franchising means low financial returns for the franchisor, it ensures lower risks and offers the opportunity to enter new markets without long-term investments.

Franchising is a cheap way to expand and an excellent way of keeping overheads to a minimum. This system passes the costs of expansion and overheads, like rent and staff salaries, on to the franchisee.

The franchisor doesn’t have to deal with problems of recruiting personnel. Yet he can get the advantage of local managers who know the market with its customs and preferences.

For the franchisee, the franchise offers an opportunity to start a business without the concept, image and products already developed. The franchisee gets the advantage of the franchiser’s brand name, reputation, experience, and advertising and promotion campaigns.

The franchisor supplies an operating manual, showing how the business should be set up and run. He will also supply consulting and legal services, hiring and training management personnel. There may be refresher courses to retrain them. The franchisor will normally supply the equipment and a stock of product. If things go wrong and profits are low, a franchisee can get help from the franchisor’s trouble-shooter.

The franchisee has various commitments under the terms of the contract. He can’t sell the franchise without the franchisor’s agreement. He is obliged to show the franchisor all the documents and provide the reports on the level of sales. He may have to buy supplies from one source. The franchisor insists on a strong corporate image.

There are three different strategies for franchise agreements. Firstly, the franchisor may choose to contract with individual franchisees for individual locations.

Secondly, the franchisor may use area development agreements. They allow one franchisee to exploit a particular geographic area, operating many franchise outlets and develop a particular market fully.

The third kind of franchise agreement often used internationally is the master franchise agreement. It gives a franchisee the right to develop the market in a particular territory and to subfranchise.

The franchise is a business relationship, based on contract, but relying on flexibility, faith and mutual efforts towards success.

Notes

to franchise – заключать договор на условиях аренды на условиях франшизы franchisor – франчайзер, франшизодатель

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Translate the sentences from Russian into English.

1.При заключении контракта на основе франчайзинга обе стороны принимают на себя определённые обязательства.

2.Франшизодатель обычно берёт на себя обеспечение основных компонентов бизнеса. Прежде всего, это утвердивший себя на рынке продукт или услуга и широко известная торговая марка.

3.Как привило, франшизодатель обеспечивает необходимое оборудование, сырьё и рекомендации о самом эффективном способе ведения данного бизнеса.

4.Франшизополучатель берёт на себя определённые обязательства. Он инвестирует капитал, покупая лицензию на право вести дело под определённой маркой на определённой территории. Кроме того, он обязуется выплачивать отчисления с суммы продаж и отчитывается перед франшизодателем по результатам коммерческой деятельности.

5.Контракты франчайзинга могут включать самые разнообразные условия. Некоторые из них могут быть не очень выгодны для какой-либо стороны, но каждый участник договора решает для себя, чего больше в этом контракте для его бизнеса – преимуществ или недостатков.

6.Тот факт, что франчайзинг так стремительно распространяется во всём мире, свидетельствует о том, что принципы подобного сотрудничества взаимовыгодны для всех его участников.

File 1

Glossary

Make sure that you know these words. Find Russian equivalents to them.

toiletry items (toiletries) – items and substances that you use in washing yourself and preventing the body from smelling unpleasant

outlet – a shop that is one of many owned by a particular company and that sells the goods which the company has produced

franchise – a right to sell a company's products in a particular area using the company's name

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warehouse – a large building for storing items before they are sold, used or sent out to shops, or a large shop selling a large number of a particular items at a cheap rate

to crown – to complete worthily; to make smth perfect or complete, by adding an achievement

elaborate – containing a lot of careful details or many detailed parts to figure – to consider, to believe

crucial decision – extremely important or necessary genuinely – really

shrewdly – skillfully

point-of-sale – the place where the consumer actually buys an article or commodity, usu. a shop, but it may be a mail-order house, market stall, etc.

tester – a small container of a product which you can try in order to see if you like it to enter the market – to start selling goods or services in the market

to push aside – to force back, press back; to edge a competitor out, to oust

operation – the work or activity done by a business, an organization or the process of doing this work; a company or a business

sub-contractor – a person or company that does part of a job which another person or company is responsible for

ceiling – an upper limit, usually relating to money

franchisee – someone who is given or sold a franchise to sell a company’s goods or services

franchisor/franchiser – a company that sells a franchise

gross profit – the amount by which, in a given period, the value of sales is greater than the cost of goods sold, without taking note of any expenses for selling, distribution or administration

operating fee – charge for running a business

to run a company – to be in control of, to manage

to decide against – to make decision not in favour of smb/smith; opp. to decide in favour of franchise premium – the cost of franchise, esp. the amount that smb pays each year set-up costs – the amount of money needed to start a new business, project etc.

to arrange for – to make preparation (for); to plan or settle in advance to provide – to make smith available

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normal credit status (credit rating, credit standing) check – examination or investigation of a borrower’s ability to pay

premises – the land and buildings owned by someone, especially by a company or organization

initial outlay – an amount of money spent for a particular purpose, especially as a first investment in smth

ABC – Audit Bureau of Circulation

kit – a set of things, such as tools or clothes, used for a particular purpose or activity to label – to fix or tie a label on smth

oversight – an unintended failure to notice or do smth

transferable idea – the idea that can be used by anyone without permission to revolutionize – to completely change something so that it is much better

lease – a legal agreement in which you pay money in order to use a building, piece of land, vehicle, etc. for a period

Θ Wendy Rae Body Care Centers Inc of Santa Monica, California, sells a wide range of natural cosmetics and toiletry items, through a world-wide chain of outlets. Although the company has a small number of centers of its own, most of its outlets are operated on a franchise basis. 97% of the products are manufactured by sub-contractors, according to formulas developed by the company. The main activities of the company, therefore, are warehousing and distribution. Since its incorporation eight years ago, the company has been phenomenally successful.

The following article appeared in the October issue of “Business USA”.

Read the article.

BUSINESS WOMAN OF THE YEAR

At the World Trade Center on September 21, Wendy Rae, founder and Chief Executive Officer of Wendy Rae Body Care Centers Inc., received the Wall Street

Chronicle “Business Woman of the Year” award. The award crowns eight years of phenomenal achievement by Mrs Rae.