4th-year student, sp. “Foreign Trade”, d/d, Scientific Advisor – N. M. Grygoriv, Chernivtsi Trade and Economics Institute of KNTEU, Chernivtsi
THE STATE OF FRANCHISE MARKET IN UKRAINE
As a means of starting or developing a business, opening a franchise is one of the most stable and available profitable investment opportunities. Franchising allows an entrepreneur to take advantage of a visible and recognized brand and know-how and provides established companies quick access to international and developing markets. Franchise agreements in Ukraine are signed from the middle 90th. In jurisprudence there is a term “commercial concession” and legislation is used on the basis of it. However it doesn’t hamper the development of franchising and businessmen find the way out from such situation [1]. Different sources name a number of four hundred franchisers in Ukraine. But for all that, the actual situation shows that about two hundred of them develop actively and constantly. All others are the Russian companies that want to get into Ukrainian market or Ukrainian companies, that have already opened one or two franchise units. Part of conceptions is adopted from abroad, especially in the field of trade and services. Greater part from foreign conceptions is Russian. Another ones are from Poland (Atlantic, Cropp Town, Reporter, RuckZuck), Germany (Liqui Moly), USA (International Kids Club, FasTracKids, Crestcom, Sport Life), Italy (Canti Cucine, Colours&Beauty), France (Frederic Moreno, Catimini, Carling), Great Britain (ChipsAway, Hostel) and others. Majority of them – about 60% – open their own representative office, some of them take advantage of cooperation with one partner getting a right to develop the territory of the whole country – Helen Doron Early English, FasTracKids, etc. [3]. Every day franchises at the Ukrainian market become more various, new industries and technologies appear. A price range also enlarges: franchisee can choose from cheap franchises of domestic services or rental and expensive franchises of fashionable restaurants and production [2]. But the most profitable and active remain companies which develop foreign franchises. Ukrainian undisputed leader is “Fast Food” company (FFC). Some Ukrainian restaurant business operators currently consider the possibility of purchasing foreign franchises to strengthen their portfolio of business and capitalization. The most dynamic market in terms of investments is hotel business. This was greatly contributed by Euro 2012 in Ukraine and the desire of property owners to fill their hotels as soon as possible by entering into world-famous hotel chains. This event has become a fair contribution, as a great number of foreigners have got acquainted with Ukraine and will be back to Ukraine in the near future, and will certainly want to organize a business here. Franchising Development Federation predicts penetrating Ukrainian market by number of international operators of real estate industry and most famous brand of restaurant business. Period of crisis stress of 2008 turned into a period of active search for those activities that help entrepreneurs in the stable existence and gradual development. The total number of businesses in Ukraine developing in franchising has become 40-50% less over the period of 2008-2011, however such reduction has qualitatively affected the market. Basic reduction was caused by franchises that harm the sense of franchising due to accordance with norms of this kind of business relationship, as it is considered by Ukrainian Franchising Development Federation. To be more precise, about 200 foreign and Ukrainian trade marks are operating under the system of franchising in Ukraine [3]. Despite the recent decline, according to researches of experts of the Federation of franchising, hospitality and infrastructure of Ukraine (FDF) there is a high prospect of industry development – there are still many sectors, which in future will operate under the franchise. Indeed, in these industries today, there is very low competition, but they are profitable and in the process of formation in Ukraine. These industries include agriculture, delivery, real estate operations, sales of second hand goods, design and architecture, distribution, storage. Franchising has a list of benefits that can reduce operating costs and increase efficiency of production, what is especially important for Ukraine in terms of modern conditions. However, despite this large number of advantages, market franchise has a number of issues to be resolved. These issues should include the following: ignorance of Ukrainian entrepreneurs regarding basic business principles for the franchising; inconsistent legal regulation of franchising development, concerning environmental protection and state of commercial relations; requirements for registration of commercial concessions agreement that currently govern the relationship between partners in the franchise system; lack of information about franchising as a method of business conducting; lack of practice in testing business. Tax Code of Ukraine significantly narrows the prospects for small businesses development and makes entrepreneurs seek workarounds in the proceeding of “royalties” and “franchise fee” payments to their partners. Therefore, we can confidently say that franchising has a list of benefits, however, despite this large number of advantages, market franchise has a number of issues to be resolved. Selected Bibliography: 1. Report about franchising in Ukraine. – [Електронний ресурс]. – Режим доступу : http://franchise2profit.com/report-ukraine 2. State of franchise market in Ukraine. – [Електронний ресурс]. – Режим доступу : http://fdf.org.ua/index.p....lang=en
