What is a franchise? - the answer lies in brands and insurance

Now a lot of foreign words are more and more part of our vocabulary. One of them is a franchise. Only a few years ago only "advanced" businessmen worked with this term, but now any businessman who wants to improve their well-being faces him.

The question "What is a franchise?" Can be answered that this is the term of economic science, which can mean:

- part of the losses of the person insuring the property;

- the right to franchise;

- Creation of an enterprise based on franchising.

In the first definition, a deductible means a part of a person's losses when insuring property that is not subject to reimbursement by the insurance company under the terms of the contract.

In the second definition, the term explains the right to establish an enterprise that sells partner products.

The third factor is the creation of an enterprise based on franchising. For example, shops of well-known brands of cosmetics and clothing work in this way.

So, what is a franchise? In simple terms, it is a kind of leasing a trade mark or products, as well as the use of an existing business system in its activity. The founder of franchising is "McDonald's". Indeed, thanks to the wide sale of its franchise around the world, McDonald's brothers with fast food items have become quite popular.

Franchise - what it is, understands almost everyone when contacting an insurance company. The insurer explains the franchise as the release of his company from the obligation to compensate for losses that do not exceed the established size. In this case, the conditional and unconditional value differs.

What is a franchise in insurance, it is very clearly possible to show an example. So, a person makes out insurance for a new car. The fixed amount is 5 thousand dollars. Then, when choosing insurance under the system of "hijacking + damage", the insured will have to pay 400 dollars. The insurance company offers to do this with a deductible of $ 100, and a person will pay for insurance not 400 dollars, but 380. At the time of registration of insurance this option is definitely profitable. But when an insurance event occurs, there are some nuances.

For example, there were small scratches on the car or a broken headlight. Since the amount of damage does not exceed the cost of the franchise ($ 100), the repair is made by the owner at his own expense. With minor breakdowns, it is possible and easier to have a certain franchise. So, a person calls at the car service, where for a short period of time they eliminate all minor malfunctions. Otherwise, he would have to exchange for a long time the relevant securities with the insurance company, while they will reimburse the damage in the amount of the agreed amount.

If the loss was $ 120, then the insurance company will refund only 20 of them. But if you take into account the number of necessary securities to receive $ 100, then many car owners because of such a small amount do not contact the insurer and take all the costs for themselves.

In the case of more serious damage, the situation looks somewhat different. For a renovated car, the car service invoices an insurance company, which in turn pays the bill for $ 100 less. These missing money must make the owner of the car. In this situation, only the insurance company remains to be won.

The above described franchise is characterized as unconditional. This type is the most common and it is offered by insurers.

What is a franchise, shows the conditional method of its accrual. So, if the losses on the insured event did not exceed its cost, then the owner of the car bears the costs. If the amount of damages is greater than the deductible (even if insignificantly), the insurance company will compensate the damage completely. This type is more beneficial for the insured, but insurers offer it very rarely.

Thus, in this article we have defined "what is a franchise", its varieties and methods of application are listed.