Article by Pierre Godet, published today in les echos.fr
LE CERCLE. Entrepreneurs are often faced with the fundamental choice of whether or not to rely on a network. The advantages are undeniable. Franchising and associated trade have major differences. According to Pierre Godet, partner at Qantea, business creators should focus on the type of activity they wish to develop, and study the content of the contract in detail before committing themselves.
The five-year survival rate for networked businesses is far higher than for solo ventures. This figure alone justifies a study of the opportunities offered by this type of structure.
For those who have decided to take the plunge and become their own boss, there are several reasons for developing a networked business:
- Rely on a brand's reputation,
- Benefit from a proven method,
- Support throughout the contract,
- Avoid isolation,
- Contribute to the company's development.
But the question is which type of "network" to choose. In addition to independent and integrated trade, there are several other types of organized commerce: franchise networks and associated trade.
Franchising: duplicating success
Franchising is a network based on a contract between a company - the franchisor - which owns a brand or trade name, and one or more independent retailers - the franchisees. The principle is to repeat a success. The franchisor undertakes to provide its franchisees with differentiated know-how and ongoing assistance, in exchange for an entry fee and royalties on their sales. Franchising is booming: over 1,650 networks, some 65,000 franchisees in 2012 and sales of over 50 billion euros.
Associated trade, based more on the pooling of resources
Generally managed in the form of a cooperative, grouping (or associated commerce) is a system designed to pool resources and know-how. Members are independent entrepreneurs, who are both shareholders in the joint venture and customers of the central organization.
The principle of "one man = one vote" is applied when voting at general meetings. Associated trade (145 national banners and 80 groupings) represented sales of around 130 billion euros in 2012, or 29% of French retail sales, and includes 41,000 outlets for 30,000 independent entrepreneurs.
Mixed forms
In addition to specific contracts such as concessions, brand licenses, commission affiliation, etc., we should also mention participative franchising, in which the franchisor joins forces with the franchisee to develop certain businesses.
Organizational modes are tending to converge
There are several fundamental differences between franchising and associated trade:
- Capital-intensive model and governance: in associated commerce, the outlet operators are also the owners of the cooperative, so they ultimately hold the decision-making power; in franchising, power is concentrated in the hands of the franchisor.
- Pooling of resources: the franchise network "imposes" its own organizational structure; in associated commerce, each member, a partner in the cooperative, contributes to the development of the brand and the definition of sales policies.
- Contractual links and legal structures: in both organizations, the entrepreneur runs his own legal entity, which is not the owner of his brand, but the links with the network are not of the same nature: franchise contract on the one hand, association in a cooperative structure on the other.
Despite these fundamental differences, organizational and operational methods tend to bring the two types of organization closer together. For a franchise network, as for an associated business, it is imperative to guarantee the homogeneity of the network and the jointly-operated brand: common sales policy, shared communication initiatives, common organizational processes (operational manuals).
When making your choice, take into account the specific characteristics of your entrepreneurial project.
As a general rule, future business leaders need to think in the long term, and focus above all on the compatibility of the network they intend to join with :
- Its needs,
- Its market/activity,
- His personality.
While, in principle, each partnership contract has its own specific features, in practice it is not uncommon for each to borrow elements from another. So don't stop at legal definitions or the title of the contract. It all depends, in fact, on the content of the proposed contract!
The personality of the entrepreneur, his or her professional experience, and the location of the business (e.g.: shopping mall) may encourage a company to opt for a specific type of partnership.
Increasingly, network heads are looking to boost their distribution network by offering "à la carte" services to their distributors.
Whatever the network, the entrepreneur must make an informed commitment: the law provides for a fundamental document: the pre-contractual information document (DIP), which is mandatory for franchise networks, but whose equivalent is required whatever the legal nature of the network. The conclusion of a contract is the basis of a partnership between two companies wishing to create a form of organized commerce, in order to clarify the commitments and constraints of each party.
To access the article:
http://lecercle.lesechos.fr/entrepreneur/creation-dentreprise/221197498/franchise-commerce-associe-comment-choisir
