Barda V. S., Beschastna D. O., Goncharova Y. S.
Oles Honchar Dnipropetrovsk National University
FRANCHISING DEVELOPMENT IN UKRAINE
The current state of franchise market in Ukraine is quite dynamic. Foreign companies are interested in cooperation with Ukrainian partners.
The period of the 2008 crisis stresses has turned into the period of active search for those activities that help entrepreneurs in maintaining stability and gradual development. Total number of businesses in Ukraine, which are developed as a franchise, has declined over 2008-2011on 40-50%; however such reduction has qualitatively affected the market itself. According to the latest statistics, about 200 foreign and Ukrainian trademarks are operating under the franchising system in Ukraine.
The most profitable and active remain companies that develop foreign franchises. “Fast food system” company (FFS) is the leader among other Ukrainian companies. Some of Ukrainian restaurant business operators are currently considering the possibility of purchasing foreign franchises to enhance their own business portfolio and increase in market capitalization.
Hotel business is the most dynamic market in terms of investments. Its development was boosted by UEFA Euro 2012 in Ukraine. This significant event helped a lot of foreigners to get acquainted with Ukraine. After that many people have not just wanted to come back again to Ukraine, but also decided to start their business here.
According to the observations of analysts, franchise market abroad has the largest share in food service: 56.3% of the total number of fast food restaurants are franchised, 14.2% of enterprises selling food, 13.1% of full-service restaurants, 18.2% of the hotel business enterprises are developing under franchising system; and in the service sector: 4.9% – businesses that offer car services, 3.3% – business services, 1.5% – services in the real estate market.
However, the franchise market also has some issues to be resolved. They include the following:
• unawareness of Ukrainian entrepreneurs about the basic principles of doing business as a franchise;
• inconsistency between law regulation of franchising and development state of commercial relations;
• moral and pecuniary unpreparedness of businesses and consumers to this type of relationship;
• lack of qualified personnel;
• difficult conditions and barriers in the organization and conduct business.
Over the past five years, a lot of local offers appeared in various sectors. According to the Federation of franchise development in Ukraine, the key trends in the franchising development for 2013 are:
Global movement. Most of the franchise owners in CIS and their prospective investors will aim their efforts and money abroad. Franchisors will understand the need to develop relations with, as they call it, "franchise developers". Potential investors will realize that buying a ready business or franchise, which will have to be developed in a foreign territory, will not be easy and it is much better to entrust it to the already tried developers. Banks will be able to lend to franchisees with a successful record and franchisors will trust such partners more.
Refranchising. This is a situation in which one company (a franchisor) sells a part of the business owned by franchisees, or sells a part of the business in other territories, which was developed independently, to its new business partners. In recent years, Burger King, Pizza Hut, KFC, and dozens of other well-known franchises have started refranchising.
There are substantial economic incentives to leave the work with own store network: collecting fees (royalties and lump-sum payments) is much easier than developing sales of goods and services in foreign territories.
Fast food goes healthy. The pace, with which the fast food market was developing the last five-ten years, is now gone. Now everyone prefers healthy food and fast food chains will do anything to keep the waist of their visitors thin.
Digital technologies. For a long time, franchising had a strange combination of intuition and research. But today franchisors see the benefits of digital data processing: the choice of partner, location, customer retention programs at the local level, etc. Several years ago McDonald`s site was the only site in digital format that could determine the location of their future spot. Today it is the standard. Digital payment for goods and services, resisted by franchising for so long, is now widely used.
These trends show that franchising in Ukraine has changed dramatically and continues to evolve according to the global trends and the current situation in the country. Just look at how fast it won the major branches in the field of consumption. Despite all the problems, it has enormous potential for expansion in the CIS countries, including Ukraine.