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Intro to Franchising



The world leader in franchising is the United States of America. Franchising takes a big part of the business in the US. Among the rankings of the franchises in 2010, on the first place was Subway, the second place took McDonald's and the third place was taken by 7-Eleven. From this top list of franchise companies around the globe, we see that all of them are US franchise companies, and 2 out of 3 companies are involved in fast food industry. And this is not surprising as there are many advantages of running a fast food franchise. The most important one is that there is a same developed menu in each branch that the clients are aware about. As an example, let's say a person traveling from Seattle to Kansas city does not know good places to eat out and in order not to be disappointed she/he will choose to go to a familiar Subway or McDonald's for example.

There are notable advantages as to the franchisee, so to the franchiser. Thus, a franchisee gets the rights for the brand and the technology; gets support in development of his business; gets information about the market, production methods and the method to work with clients. A franchiser gets the reward (royalty) for the use of his brand and technology, expansion of franchise business in the regions; information about the local markets and flexibility in working with clients.

One can not claim of a developed franchising business in the region of Central Asia. There are five Central Asian countries: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. Two of those (Turkmenistan and Uzbekistan) have almost a closed economy so to say. Kyrgyzstan and Tajikistan are still developing their internal market and find it much cheaper to produce with their own products (here, agricultural for fast food industry). Kazakhstan has one of the stronger economies in the region, mainly due to the oil reserves. Thus, one of the biggest franchising markets in CA is Kazakhstan's. In 2010 franchise turnover in Kazakhstan made up $1 billion per year. Some of the world brands present in Kazakhstan include Hilton, Marriott, Intercontinental, Pepsi, Coca-Cola, and Pizza Hut. Due to the big interest in this topic, there will be held an international expo on franchising in November of this year in Almaty, Kazakhstan.

Currently, there are around 300 franchise systems in Kazakhstan. Such a big development of franchising led to the need of introducing specific laws and regulations. The laws on franchising already exist in 33 countries in the world. Such a popularity of franchising may assume some profits from this type of business.

Couple of big franchisers in the CA market are Coca-Cola that has its factories in Kazakhstan and Kyrgyzstan; Russian franchiser 1C that deals with manufacturing of software and automatic system of accounting. Market for brand clothing is also becoming very popular as in Kazakhstan, so in Kyrgyzstan. Such brands as Benetton, Colin's, MANGO, Mexx  are present in Kyrgyzstan and Kazakhstan and in addition there are also Froggy, Gloria Jean's Coffees, Hugo Boss, LEFUTUR , and Tony&Guy and many others in Kazakhstan. Will take a closer look at the franchisers present in Central Asia in the next post. Stay updated.



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