A franchise is created when a company (franchisor) licenses its trade name (brand) and its business model (business system) to a person or group (franchisee), who agrees to operate in accordance with the terms and conditions of the franchise agreement. The franchisor provides the franchisee with support and has a certain level of control over how the franchisee operates. In exchange, the franchisee pays the franchisor an initial/franchise fee and a royalty for the use of the brand name and business model.
The franchisor is an enterprise owns a brand and a visual identity recognisable in the market, is able to market a range of products/services/technologies through classic distribution channels, has developed a sales and business method that has been tested and updated at individual business units, has a developed system for transferring its methods, experience and knowledge to its prospective franchisees through training and continual counselling and has a proven business concept (minimum 1 year of independent operation in the market).
The franchisor and its individual franchisees form a franchise network and it is the franchisor’s duty and responsibility to ensure the network’s operation of and growth, in keeping with the brand’s recognisability and quality. Because of the common, uniting brand, a franchise network quickly builds its identity and reputation in the customers’ perception. The coordinator of that reputation, recognisability and value is the franchisor, who must keep all those elements under control.
When to opt for developing a franchise?
You will develop a franchise if you wish to significantly expand your business, i.e. if you wish o expand your business to reach its optimum size and maximum profitability. The first step is converting your business concept to a franchise package and developing a network of franchisees.
It is often the case that the market will value your company much more than justified by its gross sales and revenue (brand power). Ultimately, the only thing that matters to end consumers or the market is a recognisable brand. For the customer, it guarantees the quality of a product (service) and a company’s entire range, and this is the main reason why the franchisor must transfer its experience and knowledge to the franchisee in great detail. This requirement is the sole guarantee that customers’ trust will not be betrayed. Franchise networks help products and services reach end consumers faster in areas outside of large cities, which is a huge benefit for customers.
The process of transforming an existing business format into a franchise concept takes time and extra investment. You will need help from a good franchise advisor, as well as an expert legal advisor specialising in franchising. Indeed, a franchise advisor can save you from additional investment.
The Chamber of Commerce and Industry of Serbia offers the easiest access to all the assistance you may need, as a “one-stop shop” service. We can assist you in the development of a franchise concept and the expansion of your future franchise network through promotion and sourcing of prospective franchisees.
In parallel, we also offer our services to foreign franchisors, providing them with the necessary information on trends, development potential and current market analytics (by sectors and/or specific segments) in the Republic of Serbia, as per their requests.