Global Franchising Group works in three main directions:
1. Development of traditional franchise system;
2. Development of modified systems of franchise – Franship;
3. Development of local franchisees’ cooperatives, that implies establishing unions under umbrella of well known foreign brands or newly created local brands.
1. Franchise development
Within this direction, a franchise is defined in traditional way, as a contractual relationship between a franchisee and a franchisor in which the former agrees to produce or market a product or service in accordance with an overall “business system” devised by the franchisor.
The relationship is a continuing one with the franchisor providing ongoing support and advice, research and development, and help with marketing and advertising.
In return, the franchisee usually pays an initial franchise fee and also an ongoing royalty or management service fee normally based on gross sales or a mark-up on supplies purchased from the franchisor. The franchisee provides the capital for the business and is a legally separate entity from the franchisor.
2. Franship system development
Franship system is a composite of elements of franchising and joint venture projects. It proposes a business relationship based on parity.
The franship system is a joint venture in which one party (grantor) grants to another party (the grantee) the right to operate a business selling products/services produced or developed by the Franship entity under the grantor’s business format and identified by grantor’s logo and trademark.
The Franship entity is owned jointly by the grantor and the grantee and receives a license to operate by the grantor in the grantee’s country.
The grantor contributes the know-how and experience and the grantee contributes the initial capital investment, or supplemental capital investment, motivated effort, and operating experience within the country and its variety of markets.
The Franship, like the franchise model, includes a format for the conduct of a business, a management system for operating the business, and a shared trade identity.
Advantages for franchisee
The franchisee benefits from being part of a large system that has long-term records of success. It is less risky than standing alone in business.
The franchisee gains:
- Proven business concept, experience and know-how of the franchisor
- Shared motivation for success and reducing transaction costs
- Established and recognized brand, product and services
- Shared costs of branding and marketing
- Established operating systems
- Knowledge of start-up costs
- Provision of training and expertise
- Reduced start-up and operating costs
- Proven supply chain
- Network of fellow franchisees
The GFG helps interested local companies to analyze pros/cons of specific project in process of making decision.
3. Franchisees’ cooperatives
Global Franchising Group aims at exploring potential of the cooperative concept in sphere of franchise globally. Cooperative proved itself as effective survival and developmental instrument for SMEs.
The GFG works in two directions in this respect:
- Finding well known foreign brand for the local cooperatives;
- Creating new local brand for the cooperatives.
Franchisee’s cooperative has principal advantages:
- Greater strength and size in the market;
- Unique capital raising mechanisms;
- Sharing ideas, service costs and risks;
- New services and know-how get affordable to cooperatives, etc.
Model of Franchisee’s cooperative
The GFG acts as brand owner, service provider and supporting intellectual network for the franchisees’ cooperative.
The group initiates process of cooperative creation and provides the following services:
- Assistance in working out overall business strategy;
- Searching for well-know franchisor or creating new local brand;
- Intellectual support in process of brand promotion (research, marketing, etc);
- Searching for effective supply chains;
- Creating unified distribution system and logistics;
- Providing relevant information concerning available alternative financial sources and strategies; Assistance in credit obtaining process;
- Assistance in human resources management.
Using the GFG service will result in significant transaction costs reduction, enhanced productivity, competitiveness and bargaining power of the cooperatives.
The GFG adopt business-like approach to manage the franchisees’ cooperative project. It elaborates fee-based business relations model to ensure cooperative members commitment, the best performance and maximize value for money. Each cooperative member enters the union as independent owner of the company (legal unity). Project participants will be selected through competition. The meeting of the members sets up the rules of operations, leadership structure and ownership.
The GFG is brand owner in case of creation new local brand.
The cooperative members must establish a solid financial foundation from which to grow and receive services to the membership. Members can contribute their equity in different ways.
The proposed model implies to create fee-based cooperative’s foundation.
The cooperative runs the foundation in cooperation with the Global Franchising Group to receive services needed for daily operations and log-term growth (administration costs, research, marketing, legal, financial and human resources consultancy, development of new brands, etc).
Franchisees’ cooperative as an opportunity to obtain financial resources
Members’ ownership capital funds provides adequate base to obtain external financing as well.
A variety of financing strategies actually are available for the franchisees’ cooperatives.
The GFG provides all the relevant information concerning available financial sources and strategies. In cooperation with financial consultants The GFG defines compatibility of the financial resources and specific cooperative project.
The financial consultancy results in knowledge about what fits the cooperative and ability to argue their case effectively.
The GFG helps in exploring new alternative and less risky financial strategies (for example, leasing) and credit lines with competitive terms and interest rates.