Ilya Dudkovsky, Avito: franchise market shows stable growth

“People decided to look for assets where to invest money”

“We really see an increase in both supply and demand across Russia. In Tatarstan, indeed, there is an increase in certain business sectors. Demand this year is initially higher than in the previous year. The highest was in February and at the end of September, but now there has been a rebound. Judging by the analysis conducted at the beginning of the year, in general, there is a very large increase in micro and small enterprises at the federal level. There has also been a very large surge in IP registration. People decided to look for assets where to invest money. A ready-made business or franchise has become such possible assets. For example, since the beginning of the year, we have seen a constant increase in demand. At the same time, the offers are not growing so much compared to last year. There was a jump in supply in late September and early October. Moreover, the increase in demand was caused by that it was possible to find a good object at an attractive price. People, due to changing circumstances, were ready to make concessions in order to sell their current business," Ilya Dudkovsky said.

Demand for the purchase of a franchise has gained higher growth rates than for a ready-made business. So, in January-October 2022, interest in acquiring a franchise increased by 59% year-on-year, while the purchase of a ready-made business was interesting by 49% more often than in January-October 2021. The growth rate of demand occurred due to changes in the economic situation. In the current conditions, investing in the purchase of a franchise is considered as a more reliable investment option than buying a ready-made business.

The franchise market is now becoming more and more interesting, as it shows stable growth. At the moment, they are becoming more attractive because they offer a ready-made business model with a promoted brand, developed and proven business schemes. In Tatarstan, the number of active ads in the finished business reaches 3 thousand, and half of them are franchises.

“In general, the level of demand in Tatarstan in the franchise category is higher than in the whole of Russia. On average, almost 3% of contacts are for each ad per month. The average in Russia is 2,7%," the head of the Avito category commented on the situation.”

In Tatarstan, demand in the period from January to October 2022 in the ready-made business category increased by 8,4% year-on-year.

The highest growth rates are noted in the categories:

1. Hotels and recreation centres (+95%);
2. Beauty (+68%);
3. Medical business (+54%);
4. Creation of online stores and websites (+48%).

“This year there has also been an increase in pickup points. Now marketing is actively developing at the level of the whole country and, as a result, they are followed by pickup points — a fairly predictable business with understandable costs and revenues. We see an increase on our site in response to requests from such objects. There is an increase in the tourism industry: we include hotels, recreation centres and everything related to this. There is also a certain logic here. Over the past three years, it has become increasingly difficult to go abroad, respectively, all this has pushed for the development of local directions. Due to the increase in the cost of transportation, air tickets have become more expensive. People began to look at local places where you can rest. It turns out that in many regions there is an increase in demand for the purchase of objects related to tourism, and, it would seem, not even very tourist ones. Traditionally, there is a high demand for our sites in the service and catering sectors. Everything is obvious here: no matter what, people want to be beautiful and well-fed. On the one hand, there is a lot of turnover here, as new objects constantly appear. On the other hand, business seems clear. Even those investors, aspiring entrepreneurs who may not be very familiar with business, it seems to them that it is easier to understand this business. But it can also be deceptive. In Tatarstan, here, on our site, there is an increased demand for objects in the sphere of online stores and IT companies. According to the level of demand in Tatarstan, this category ranks 3rd. And in general, it is in 8th place in Russia," Ilya Dudkovsky said.

“Good objects are always sold quickly”

“We must understand that the prices for a ready-made business for a franchise are still not exactly a market story. It is more due to the real financial performance of a business. There is no such thing that if demand is actively growing, then prices are also rising. Good objects are always sold quickly. Due to that some people sold a business quickly, it was possible to buy profitable objects for a good price. This is understood by those who spend some time in this area <...> There were individual cases when the business as a whole was sold, and if it was disassembled into assets separately, then these assets cost more than the entire amount of the business being sold," Ilya Dudkovsky said.

The opportunity to purchase a franchise in Tatarstan was most often attractive in the following areas:

1. Entertainment industry (+700%);
2. Catering (+194%);
3. Services (+145%).

The key factor explaining the increased interest in buying a franchise is that entrepreneurs may not always be ready for the risks associated with managing a business by previous owners and prefer to start a business on their own “under the wing” of an already well-known franchisor.

“We look at the growth year by year usually. The readiness category “franchising” has a rather specific seasonality. Demand peaks around the first quarter. Starting from the second half of January and until mid-April, people are much more actively looking for objects to invest in than in the summer. In winter, people are either ready to sell their business objects, since the end of the season and you need to present your business beautifully in the following year, or already buy ready-made. After September 21, the increase in supply and demand was greater than last year, and also more than during the whole year. Franchises are really gaining popularity now," the expert noted.

What is better to do with money — invest in a ready-made business or invest in a franchise?

“The franchise seems, on the one hand, a little predictable. On the other hand, it is creating a business from scratch. We conducted a survey of users of our site who choose a business. 83% said that they plan to do everything themselves in the future business, do not plan to hire even managers. Accordingly, the franchise seems a little safer, although it should be understood that any franchise and any forecast values of the franchisor may not always be accurate. People are more likely to buy a franchise than a ready-made business, because there are fewer risks, there is support, plus you build everything yourself. A franchise is growing faster than a business because it seems to be a more manageable, more reliable business. Catering areas are also always popular here, there are a lot of coffee shops, beauty salons and nail salons. There are more unusual franchises, for example in the field of education, there are many startups that then begin to offer franchises. Kindergartens are also relevant for the franchise," Ilya Dudkovsky noted.

In Kazan , by January-October 2021, the demand for ready-made businesses and franchises increased by 16% . The highest growth is shown by the category “hotels and recreation centres” — by 116%, “beauty” (+81%), “medical business” (+60%), “auto business” (+58%), “online stores and websites” (+45%). The interest in acquiring a franchise increased by 80% year-on-year, while the purchase of a ready-made business was interesting by 59% more often than in January-October 2021.