Franchising

 

Franchising is an agreement or license between two parties. According to this agreement a person or group of people known as the franchisee gets the rights to market a product or service by using the trademark of another business known as the franchisor.

Franche are a business opportunity based on system through which a company can distribute its products or services through a retail outlet that is independently operated by a third party.

The independent operator gets the right to distribute its products, techniques, and trademarks, from the franchisor for a percentage of total monthly sales and possibly a royalty fee. In return, the franchisee has to pay an initial fee and royalties to the owner of the franchise.

The franchisors have certain established rules and guidelines which are to be followed by the franchisee as mentioned in the agreement. The term for such agreements may last from five to thirty years. Any premature cancellations or terminations of the contracts cause serious consequences for franchisees.

Buying a franchise is no doubt an advantageous step as customers are always more comfortable purchasing items from a familiar name or company they trust. These companies already have established corporate image and brand awareness. Also, the Training and support provided to the franchise owner by the franchisor helps to run a bankable business. Apart from this, having a franchise also saves time as the franchisee can now simply focus on growing the business and hence provide a great way for individuals to operate their own business easily and successfully.

Business format Franchising and product and trade name Franchising are two types of franchising methods. In the former type, the franchisee needs to pay an initial fee and agrees to pay royalties. In exchange, the owner can use trademarks and logos as well as the complete system of doing business of the franchisor. Examples of this type are fast food restaurants, automotive services, estate agents etc.

While in the later type, the franchisor not only provides the trademarks and logos and national advertising campaigns, but, also the product. Example of such type is automotive, petroleum and soft drink. The important thing about this is, there is no need to pay a royalty.

Always seek the advice of a specailized legal representative prior to comitting to any agreement.

No doubt, this industry is helping thousands of individuals gain pride in being an owner of their own profitable business. Franchising ensures a greater likelihood of success because the products and operational methods have already been established.