Franchising has been one of the profitable business models that involve the domestic players as well as foreign businesses.There are various types of franchising systems are in place, which includes the dealer arrangement, marketing arrangement, trademark-usage arrangement, product distribution arrangement, manufacturing arrangement, etc.
The franchise agreement should contain the standard provisions of the franchise. These include the right to operate the franchise in a specified area, cancellation provisions, and quality standards. The agreement should also specify if and when the franchisor will retain its intellectual property and provide continuing training to the franchisee.Â
The duration of the franchise should also be specified in the franchise agreement. The franchisee’s territory should be covered by the franchisor’s intellectual property. Any franchisee must meet all of the requirements listed in the agreement. These include property maintenance, insurance, records, hours of operation, and standards of conduct.Â
The Franchise Agreement should also specify the boundaries of the franchise territory. Exclusive territories should be protected. The franchisor must give a franchisee the right to change the name of the business. It should also specify the duration of the contract. The terms should also include any penalties for failure to meet the requirements of the franchisor.
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A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system.
In exchange for a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual royalty fees or licensing fees depending on the language in the franchise agreement in order to use the franchisor’s proprietary business knowledge, intellectual property.
There are a number of aspects to the franchising method that appeal to prospective business owners. For example, easy access to an established product and a proven method of operating a business reduces the many risks of opening a business. In fact, U.S. Small Business Administration and U.S. Department of Commerce statistics show a significantly lower failure rate for franchised businesses than for other business start-ups. The franchisee purchases not only a trademark, but also the experience and expertise of the franchiser’s organization. However, a franchise does not ensure easy success. If you are not prepared for the total commitment of time, energy and financial resources that any business requires, you should stop and reconsider your decision to enter the franchise business.
A franchisor is any business, which has a parent company that provides a basic business model and brand name. The parent company loans these principles and brand image to a third party, known as a franchisee. While the franchise is owned, operated, and managed by individuals, the entire process is overseen by the larger parent company, which is usually an MNC.
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