BARBER’S FRANCHISE FIRM BARBERSHOP

IS THE BUSINESS OF FRANCHISE PROFITABLE?

There are many ways to start your own business. The easiest way is franchising. In simple words: one entrepreneur has the technology, products, brand and a profitable income-generating scheme, while another entrepreneur wants to start to make money with help of the brand which belongs to the first entrepreneur. The first entrepreneur is the seller of the franchise, called the franchisor, the second entrepreneur is the buyer of the franchise, called – the franchisee.
The entrepreneur who buys the franchise, gets the right to use goods and technologies. Simply put, then franchising implies the lease of a trademark or methods and business schemes. As tenants can be both natural and legal persons (enterprises, firms).

Translated from French into Russian, a franchise means a concession. There are two forms of franchise – franchise development and commodity franchise . The differece between them depends on offers and conditions of use.Such kind of relationship has appeared long time ago.

HISTORY OF THE APPEARANCE OF FRANCHISE

Some experts think that franchising was invented by the queen of Spain, Isabella, who reigned in the middle of the 15th century. She gave the right to Christopher Columbus to develop trade relations with the New World. But these assumptions are not supported by any facts.
But later we can see more interesting examples, in 1851 I. Singer grant the rights to repair his famous sewing machines and redistribute them. A large scale manufacture, the massive sale of sewing machines in the USA and the lack of streamlined service became the momentum for contracted with dealers. As a result the first franchise network appeared whith  a number of individual companies. Each of them repaired, checked and serviced.
The next famous example is the General Motors. Started using franchising since 1898. Since 1920 thanks to this concern similar business schemes spread throughout the world. Wholesale suppliers became the franchisers, attracting retail sales. The retail firms were given discounts. The brand formed by wholesalers remained, companies remained independent from each other.
In the 1930s, oil refineries began using a similar scheme. Began to appear the first network of gas stations owned by franchisees. Speaking about these examples, we can not miss the vivid example created by Ray Krok – McDonalds. It happened in 1945. It began with Krok’s interest in a fast food establishment located in San Bernardino. He met with the owners and purchased from them a license to open similar catering facilities. In 1955 was created the McDonald’s System, Inc. It is called the franchise pattern. In such case, the franchisee gets rights to the scheme. This activity is characterized by many positive moments.

WHAT ARE THE BENEFITS OF SUCH BUSINESS

The first advantage is the debugged model. In this case, you can simply follow the instructions of a personal consultant. It does not take a lot of time to start your own business and you do not  have to deal with the problems that beginner enterpreneur do.
Another plus is a recognizable brand. The best-selling firm inspires customer confidence. People order a service, purchase goods from proven market participants. The established enterprise becomes a part of the familiar network, which means there is a guarantee of the quality of services and products. This allows you to reduce the cost of promotions. 60% of their income is spent by a beginner enterpreneur.
The third advantage is minimal risk. In comparison with new business projects, the success of companies created through the franchising is much higher. This is evidenced by statistics. During the existence of the franchise, only 14% of businessmen could not develop. The franchisor, as well as the entrepreneur, is interested in a successful quick start of business, because he will get the revenues too. That is why the enterpreneur constantly gets consultations and business support.
It is worth mentioning about profitable lending. Banks are willing more to lend companies that arе open this way. As a rule the franchisor acts act as the guarantor. The banks give credit to replenish current assets and business development credits.
One more pluse is a fixed sum requisite for  starting. The enterpreneur knowns for fact how much money he needs for contributions, company booking, registration of private entrepreneurship, and for buying the assortment and the equipment. Summing up,working in this way the enterpreneur can count on the following advantages:

Easy start

• Consulting support
• Curators’ help
• Recognizable brand
• Finished model
• Quick payback
• Customer confidence
• Fast loan
• Minimal risks.

To understand that franchising is profitable, we will study how does it work (or operates)

HOW DOES BUSINESS WORK ON FRANCHISE

If there are no ideas, and you do not want to risk, then this option is a profitable solution. The main thing is to find the owner of a profitable enterprise who wants to make money on activities. The enterpreneur has to work according to the owner’s schemes, so he needs the rights. For this purpose, a long-term lease agreement is concluded. The document gives the entrepreneur the right to use the brand, accumulated experience, knowledge and developed techniques. The owner is paid the first installment and a part of the businessman’s profit as a percentage.

 

WHAT IS ROYALTY, WHAT IS IT PAYING FOR

There are some contributions as in any other kind of business. It provides royalty. The royalty is the amount of money paid to the property owner. In other words, if you want to use the technology and the idea you begin with paying to the owner. Otherwise, the using of the brand and methods of manufacture, will be illegal. In 7 cases out of 10 charging orders are applied.

For example, McDonald’s the popular establishments are not documented by the company, but pay royalties. At the same time, a license for a trademark was simply sold, a promise was made to comply with the requirements and standards

Calculate royalties simply. As a rule, this is a percentage of turnover, sales. The minimum rate is 5%, the marginal rate is 9%. Tariffs are insignificant, so the type of relationship is beneficial to the parties. Also, the fee is fixed. Then a specific amount is prescribed in the contract. Along with royalties, there is another mandatory payment.

WHAT IS A LUMPSUM PAYMENT, HOW TO PAY IT, AND FOR WHAT

Who faced with such business, they know that there is one more payment. This is a lumpsum payment. The lumpsum payment paid by the franchisee to the franchisor. It is paid for the publicity and for the right to be consulted on the first mile. This is when knowledge and methods of work are transferred to the person who opens the business. It takes at least for 2-3 weeks, maximum – six months. The lumpsum payment covers the costs of engaging the franchisor into the business.
Each of the parties may rely on certain benefits for themselves.

WHAT DOES THE  FRANCHISEE RECEIVE, WHAT DOES THE FRANCHISOR GIVE

As it has already become clear from the advantages listed above, the franchisee can bargain for benefits. They are:

• Business promoting
• Ready business concept.
  The organization of the company is clearly described in steps.
• Reputable brand.
  Customers are ready to use the service and to  purchase products of the  popular brand.
• Image.
  It attracts the interest of buyers.

In addition, the agreement allows for 20-30% discounts on the purchase of equipment, assortment, cost prohibitives, and materials.

The right holder is able to give a lot. First of all it is his experience and knowledge. The franchisee can contact the franchisor on matters relating to business, because he is interested in starting to make a profit as soon as possible too. And in fact, this business becomes successful. This can be seen on the example of international structures.

WORLD PRACTICES IN GENERAL, REVIEW OF SUCCESSFUL PROJECTS ON FRANCHISE

Today there are more than a thousand profitable companies operating under such schemes. Firms were able to offer favorable conditions for cooperation. Trademarks are assessed in terms of profitability, turnover, investment, the number of franchisees attracted, speed, structure development, brand popularity, service, products. Among these giants, the following deserve special attention:

Dairy Queen. Fast Food Restaurants from America, working in 7 directions. This company created 10 brands. In these restaurants  serve hamburgers, juices, burgers, milkshakes, ice cream, frozen yogurts, drinks. The company was founded in 1940. It was one of the first in the food industry who start offering the franchises. In a short period of time, the number of restaurants runs up from 10 to 100. After 10 years, there were 1,400 restaurants. Today the chain of restaurants is represented by 6,700 in 30 countries. There are 4,400 partners only in the USA.

ZARA. The company is engaged in tailoring, clothing design for women, children and men. Shops are in 70 countries. To expand sales markets the company has begun to work on the franchise scheme since 1988. They do not have the lump sum fee, but they have to pay for the rights granted. Another condition the firm needs to buy the first batch of products for the amount agreed in advance in the contract.

Supercuts. The first salon was opened in 1975 in California. The service was based on the quality of exclusive hair salons and affordable prices. Clients were guaranteed haircuts for 20 minutes. Service was carried out without records, queues. In 1979 The company has become a franchise. Now the company has 2,400 stores in the United States. The manual seeks to maintain the growing popularity of hairdressing for men under the franchise scheme. Business is customer oriented, fast, affordable service. These factors ensured popularity in the United States of America.

Great Clips. Here it turns out to become the owner of a popular barber shop. Founded in 1983 the organization had a 3rd beauty salon. Currently, there are 4 thousand. Differences: work on weekends, night time, places are located in crowded places, for example, shopping centers. No queues, pre-recording. Clients are served quickly, efficiently.
As can be seen from the world practice, any type of business under the franchise scheme is a profitable business. Ensures good big returns in a short time.

HOW TO OPEN A BARBERSHOP

The Barbershop, in other words, is the men’s hair salon with a male-oriented hall. This is a prototypes of a tonsorial parlour. Men’s establishments are with strict sustained interiors. While customers are waiting for the queue, coffee and spirits are offered. Barbershops serve men of different professions.
To open the esteblishment a bisinessman needs a well-developed business plan. With the right approach a businessman can achieve excellent results.

CREATING A BUSINESS PLAN

It is known that entrepreneurship begins with planning. The project reflects the following aspects:

• The number of provided services.
  As a rule, the establishment offers customers hand clippings, machine haircuts, blow-waves, trimming mustache and shaping a beard. In addition, included in the list of shaving razor. As an additional service is offered: manicure, pedicure, cosmetic cleansing of the skin on the face. Open salons, where mowed children.
• The price policy.
  In the classical approach, which does not take into account the strength of the brand, set prices lower than those of competitors. After gaining popularity, the value increases. But it should not be much lower or higher than the rates established in the consumer market.
• The location.
  The first barbershop is opening as usual in the center of a city, in the places where many young people spend their time, down town. The main conditions are publicity and road junction. Nearby should not be competitors. Subsequent establishments are opened on the periphery and in the bedroom suburbs.
• Rental costs.
  The lease arrangement is concluded. The price depends on the rented square metres. The businessman has to pay a rent once a month or by mutual written agreement of the parties. The lease terms, the per square metre price and the date of leasing instalment stipulated by the laese arrangement.
• Repair costs.
  As a rule the franchisee has to do the makeovers on the premises, exchanges the utility lines and electrical services.  Halls, service spaces and sitting areas are renewed.
• Expenses for an interior.
  To get an impressive result, an interior design is ordered from professionals. The interior designers will take into account the nuances of the space, create a male atmosphere with hints of brutality. The utilitarian laconic style is chosen. There is nothing in excess, there is no any decorating unnecessary elements in the halls. Today are popular the retro or the garage styles. The establishments in the pre-revolutionary or in the youth style are invited the attention. Profitable solution – barbershop, focused on the subculture. The direction has become famous for the love of beards. Designers will take into account the wishes, requirements, starting with building materials and ending with the color of the upholstery of chairs. A design project will be cheaper than redoing everything several times. The expenses will be justified if you are going to create a barber shop for wealthy clients, but it is worth considering that such visitors are attentive, picky about the interior, the quality of the service provided.
• Marketing plan.
  It is necessary to think about how and in what way to attract customers. Marketing plays an important role there. From the plan depends on the number of visitors and the company’s profitability. Proper positioning and thoughtful advertising companies produce results.
• The number of employees.
  It depends on the number of customers that are planned to be serviced during the working day. For a start, it can be 2-3 masters. Then, as the establishment is promoted, the number of masters will have to be increased.
• Payroll.
  It is calculated based on staff. The remuneration of labor takes place according to the following schemes: percentage of service rendered, salary. The minimum tariff is 30%, the maximum pay is 50% for each service paid by customers. The interest rate depends on the qualifications of the employee
• Risks.
  Unforeseen moments are trying to identify at the development stage, to reduce the negative effects.
• The uniqueness of the proposals.
  It is necessary to offer visitors a special service. As a rule, it is: haircuts for 30-45 minutes, styling. You can also offer to buy high-quality cosmetics that help men care for their skin, hair, body, beard, mustache.
• Monthly costs.
  There are utility costs, payment of additional, necessary for the operation of the service from third parties. For example, this is the Internet, the delivery of consumables to the masters. This also includes the cost of updating cosmetics and tools. They tend to be blunt, break, end.

After developing the strategy, they start organizing and conducting the business. Next, the frachisee should think about registration.

DOCUMENTING.

A barbershop can be registered for an individual entrepreneur, a firm or a company. The first option is distinguished by loyal requests for accounting, affordable, simple registration. For registration you will need: application, passport, pay the fee. After becoming registered in the pension fund, the tax authority.

Making a legal entity more difficult. Many papers are required: a package of constituent documents, a VAT payer certificate, a charter. Here the state duty is several times more. Requirements are imposed on the size of the share capital. Paying less taxes will help the simplified tax system. At registration the activity code is selected – KVED. If it is planned to sell cosmetics in addition to the service, then the 2-3 code is indicated in the certificate. Activity does not need licensing. But it is mandatory controlled by government agencies, for example, SES, fire inspection. A work permit is taken from the listed structures.

After determining with the right of ownership there are 2 ways to create a barbershop: a salon organized from scratch or a franchised institution. Everyone chooses their own
version. Those who do not want to risk, overcome difficulties, it is recommended to prefer franchising. This type of business is worth considering in more detail.

WORK ON FRANCHISE

This implies the acquisition of rights from a popular men’s barber shop to run their own business. The establishment operates under a popular brand, which makes it possible to reduce advertising costs. Such barbershop have a number of advantages, which consist in:

• Assistance during the search of premises, registration of halls. You can also count on the selection of masters
• Consulting support on matters relating to the work of the babershop and organization. At the initial stage, assistance is provided around the clock.
• Reducing advertising costs. The franchisee does not have to spend money on business promotion, invest money in promotions or create a website. These all were done by the main company.
• Ever growing demand for similar services.

There are only several barbershops in our country. Similar babershops appeared only in big cities such as Kiev, Dnieper, Kharkov.

• Payback spent money for 1 – 2 years.

STABILITY OF BUSINESS

Franchisors organize master classes and courses for franchisees. The franchise business is a profitable solution that helps to develop in chosen sector, with minimal knowledge and experience. Opened franchise barbershop costs less compared when the business is organized from scratch.

For successful business it is important to find the right place.

SELECTION OF PREMISES

The barbershop is a spacious establishment. Typically, the area is 60 square metres. When financially limited, rented premises of 30 m2. In these esteblishments, 3 clients are served at the same time. Choosing the locations, attention is drawn to:

Electrical services. It is necessary the experts to check in what condition they are. Replace problem areas if it is necessary.

Utility lines. These include: heating, sewage, water supply. The harmonious work of the babershop depends on the listed systems.

Air conditioning. It has to be installed the high-quality air conditioners, creating a comfortable environmen.

In addition to the hall we need rooms for personnel, equipment and tools. It is necessary to provide a place where cosmetics which is necessary for work will be stored. Masters  should have free access to the stocks.

After the premises it is important to think about what is required in the work.

EQUIPMENT, FURNITURE, ACCESSORIES

The barbershop during work will need:

• Barbers’ chairs
• Sinks for washing the head
• Tools, hair dryers, clippers
• Consumables, men’s cosmetics must be high quality, reliable and new.
• Open-blade razors and brushes. They are the symbols of Babershops.
• A sofa and several armchairs for customers.
• A TV-set and music player
• A reception desk
• Coatstands
• Mirrors
• Water stations
• Lights above the babers’ desks
• Coffee machine.
• Wardrobes
• Store windows and display racks.

The decor should not be just stylish, but well thought out and ergonomic. Furniture fits simple as long as it is good-quality and comfortable. You can save money by purchasing a used kit in excellent condition from a former beauty salon. Thanks to its added brutal zest. At the reception desk, some use original scrap materials.

staff plays an important role too.

STAFFING

Active of Barbershop are hairdressers. Quality depends on the babers. They should be carefully selected. Suitable candidates who have received a specialized education, for example, have completed courses in hairdressers, who have an experience. Professionals are able to do at least 10 classic hairstyles, able to simulate mustache and beard. Good addition is the skill to create styling.

In addition to the above, you should pay attention to the ability of an open-blade razor. The tool is dangerous. When using such accessories it is important not to harm the visitor.

Masters should have a stylish and neat look. Professionals not only work with high quality, but also culturally communicate with the clients of the establishment. Staff should not be intrusive. Every workplace should be in order. Mandatory condition is hygiene.

In fact, it is difficult to find the right person. As an option, an inexperienced master is hired and trained on the spot. Sensible babers are able to comprehend the science for at least a week, maximum – one month.

The work of the barbershop requires additional staff: an accountant and a cleaner. As a rule, accounting is outsourced activity. Another profitable option is the head can keep the books on its own. Also he gets to save on the administrator. These duties can be assumed by the owner of the establishment.

There are situations when the owners act as the male shaving enthusiasts. Thus, they become an example to the babers and save the payroll.