Franchising as an economic category and object of accounting. The current
stage of development of Ukraine is characterized by unfavorable economic and
political climate. To improve the state of the country, it is necessary to develop small
and medium businesses, but a number of reasons, such as bureaucracy, unstable
economic situation, competition, insufficient lending, lack of investment, etc., hinder
their successful development. That is why the newly created enterprises just started
their activities become bankrupt and liquidated. A possible way to solve this problem
may be the development of a franchise business system.
Franchising is an effective start of business, as the company, in addition to support
from the franchisor receives its market share, well-known brand and business strategy.
Therefore, it can be claimed that an enterprise that begins its activity on the basis of
franchising is more competitive than enterprises that operate without a franchise.
The advantages of franchising emphasize the need to develop and study
franchising as a farsighted form of business organization. Franchising means that the
business entity has its own business, but does not remain alone with all the problems
and risks. In case that the franchisee gives his consent to invest in a franchising
company, he still remains an independent owner of the business. The franchisee
receives professional support from the franchisor, which further helps him to avoid the
mistakes that are usually made by other entrepreneurs. For the franchisor, this system
of relations allows expanding its own business with minimal risk and with minimal
cost.
In addition to the advantages, franchising as a system of relations has its
drawbacks, which should be taken into account when determining the risks for both the
franchisor and the franchisee.
Thus, for the franchisor the main risks in the implementation of franchising
operations may be: the risk of deterioration of business reputation due to poor
performance of the franchisee; less percentage of its profits than as if the franchisee
were a branch; the risk of turning the franchisee into a competitor, the probability of
distortion of the reports of the franchisee, etc.
For the franchisee to the main risks of activities in the implementation of
franchising operations the following may be included: limited autonomy of decision-
making; the risk of suffering from the deterioration of the reputation of the franchisor;
the inability to quickly terminate the franchise agreement; providing a franchise with
the condition of the implementation of a number of rules, etc.
According to the results of studies of American economists during the previous
economic crisis, it was found that about half of the new companies, that are created
during the crisis, as a rule, cease their existence after 2-3 years, and after 5 years the
level of bankruptcy reaches 70%. But, according to the Department of Commerce of
the USA, only 4% of companies operating under the franchise system are closed during
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