THE NECESSITY OF FRANCHISING DEVELOPMENT IN UKRAINE

УДК 330.342

Федорова В.А., студентка 4 курсу
ХНЕУ ім. С. Кузнеця

International economic activity in the modern world is very important for states, because it promotes their rapid development. International economic activity of a country is the source of goods and services, which the county cannot produce, it encourages investors to put their money into country’s economy, contributes to the accumulation of currency and receiving revenues from export-import operations. In the era of innovative technologies, it is impossible to form a civilized market in Ukraine, without increasing the share of small business, since this sector responds to the market in the most dynamic way. The integration of a civilized market into the production networks of more powerful economic systems contributes to the development of small business and franchising is one of the organizational forms of such integration [1].

Entrepreneurship based on the franchising format is a highly effective form of business organization with a high level of profitability and a rather low level of risk. Therefore, the main terms of franchising are:

  1. the use of only a certain trademark;
  2. the use of only the corresponding production technology;
  3. the use of sales and service policy; continuous interconnection between the partners of the franchise agreement.

In modern international business, franchising is used to:

  1. promote independent businesses;
  2. expand the business without spending a lot on creating and maintaining a massive administrative work and having difficulty in managing a wide network of corporate enterprises;
  3. transform your own existing network into an efficiently operating business.

There are various types of franchising, so his/her choice depends on: the type of business; the stability of the franchisor and his place in the market of goods and services; peculiarities of the local franchisee market. The factors that distinguish four main types of franchising, depending on the goals and areas of implementation namely production, trade, service and franchising business format [2].

Franchising takes a steady position almost in all countries of the world. Each year, the number of franchisors and, accordingly, franchise networks is growing rapidly. According to the International Association of Franchising, at the end of the first decade of the twentieth century, there were about 16.5 thousand franchisors in the world, more than 1.2 million franchisees (a natural or legal person buying from the franchisor the opportunity to study and receive assistance in establishing a business and pay a service fee for the use of the trademark, know-how and franchisor’s operation system), the total sales of networks amounted to 1.4 trillion US dollars, and employment in this area of ​​business reached almost 12 million people.

The growth of franchises (the complete business system sold by a franchisor to a franchisee) in recent years stipulated, first of all, by the popularity of franchising in clothing trade and the growth of positions in this area of ​​business. The benefits of developing the network by opening franchise brand clothing stores are obvious: lower costs (compared to their own network), rapid growth and increased brand capitalization. As sales increase several times in the shortest possible period, franchising in this sphere is particularly beneficial for producers. There is an opportunity to open an outlet even in those cities where the company did not plan to open its own stores. With the help of a franchisee the network captures regional markets, while remaining in the capital and cities-millionaires [1].

In the service and catering sectors, new franchise proposals have recently appeared only so much, so they are not as successful as others, but these business areas take leadership positions in franchising around the world. The reasons why these industries are not widespread in the CIS (Commonwealth of Independent States) countries lie in the imperfect system of protection of intellectual property. The TOP-10 of the world’s largest franchises in the number of franchising outlets is reflected in picture 1.

Fig. 1. TOP-10 of the world’s largest franchises in terms of franchising outlets

Fig. 1. TOP-10 of the world’s largest franchises in terms of franchising outlets

The largest share of the relative share in the regional structure of international franchising services is occupied by (31% and 34% respectively), followed by North and Latin America (14% and 12%). Australia, Oceania and Africa (4-5%) have almost not influence. With regard to the product structure of franchising services, the fast food restaurants are occupied 33% and have the largest share of the relative share in this structure. It should be noted that the share of conventional restaurants is 3 times smaller (10%), and is equal to the share of franchising services in the sphere of rent. The following are business and house estate services (14% and 12% respectively), commercial, car service, retail products and services have a significantly lower impact (4-6%) [3].

The secret to the success of the franchising system lies in the highly effective interaction between a large and a small business (franchisor and franchisee). The interest of the first category is due to access to new markets. Those in the second sphere are interested in access to resources, in the use of a well-known brand, and so on. Under such circumstances, both the franchisor and the franchisee benefit.

The attractiveness of this activity is due to the wide development of franchising in the world economy, the high level of transparency, and the advantages of mutually beneficial communication systems, which, in turn to form a homogeneous network with an efficient allocation of investments, to create a broad system of sales of goods and services, to strengthen the competitive advantages of the network participants in relation to other participants of the similar market, to provide the possibility of faster entry into the market with a minimum risk of new system participants.

For the Ukrainian economy, franchising is now a relatively new phenomenon, while in developed countries it has been practiced for centuries as a means of meeting the needs of society in various services. First of all, we should notice the fact that Ukraine has made significant progress in converging with the world community: it has become a market economy country, and has finally gained membership in the World Trade Organization [4].

As a result of such important integration changes in Ukraine, as in a country with significant European integration hopes, the latest methods of conducting business, which have long proven themselves in the countries of the European Union, have begun to be used. These methods include franchising, which for over a decade has been trying to win a decent place among the methods of doing business in Ukraine.

REFERENCES

  1. Shkutko O.M. International Franchising: Contemporary Trends and World Experience / O.M. Shkutko // Economic Bulletin of the University. – 2015. – No. 26/1. – Pp. 100-107.

  2. Murray J. Franchising: Types of franchises where to get finances. How to succeed. – St. Petersburg: Peter, 2004. – 144 p.

  3. The Need and Problems of Implementing International Accounting Standards in Ukraine.

  4. Frinchise Groupe.

  5. Franchising Market in Ukraine.

Науковий керівник

старший викладач Михайлова Л.З.