Everything you need to know about franchising
A franchisor is a company that licenses or transfers the right to use its brand, its know-how (know-how) and its operating systems. Marketingmediaweb
A franchisee is a person or company that purchases training
and assistance opportunities to establish a business with a franchisor and pays
a service fee (royalties) for the use of the franchisor's brand, know-how, and
work systems.
Franchise relationships
The franchisor (parent company) enters into contracts with
not just one, but several small businesses (operators), thereby creating a vast
network of dependent commercial and industrial companies. This dependency is
defined by the contract, in which all the rules of trade or production must be
observed, down to the smallest detail (uniformly).
But the franchisor also undertakes to provide a number of
services: supply of equipment, raw materials, technology transfer, personnel
training , accounting services.
At the same time, the franchisee also receives the rights to
use the brand, the service standards, the corporate design and the business
reputation.
A franchise is a complete business system that a franchisor
sells to a franchisee. Another name for this system is the franchise package,
which often includes job manuals and other important materials owned by the
franchisor.
A franchise relationship can be profitable for both parties:
• A
franchisee is interested in maximum sales at minimum cost.
• The
franchisee must follow the rules of conducting the business of the franchise
and participate in the advertising and marketing campaigns conducted by the
franchisor.
• The
franchisor works hard to lead the competition, which would be very difficult
for a franchisee.
• The
franchisor provides the necessary support so that the franchisee can pay full
attention to its daily operations.
In this way, the organizing company provides its partners
(mainly small businesses) with a license for independent economic activity, but
under the brand of the organizing company.
The latter brings its expertise, technology, and handles
advertising, delivery, and control (eg, fast-service company McDonalds ). In
this case, the franchisee (user), while still a self-employed entrepreneur,
pays the licensor certain contractual fees for the use of the franchise.
In addition to branding, technology and advertising, the
licensor, in accordance with the contract, can provide financial resources (in
the form of a loan), equipment (mainly in the form of a lease) and other
services (training, professional development, consulting , etc.).
In the most general sense, the franchise is understood as a
form of sale of goods and services, development and conquest of the market on
the basis of the cooperation of the material and financial resources of small
and large companies.
types of franchise
The following types of franchise are distinguished:
• Service
franchise : many foreign companies create centers in major cities, through
which they finance the purchase or lease of premises, train staff, supply
equipment and exercise control ( McDonald's ).
• Product
franchise : create extensive sales and service networks. All sales companies
use trademarks. Major companies provide tools, spare parts, know-how, finance
advertising.
The use of the franchise is beneficial for the stabilization
and development of the economy , because the franchise has a triple effect:
1. The
licensee may use the proven economic methods of the licensor.
2. The
licensor establishes a solid foundation for your business.
3. Customers
receive guaranteed quality goods and services without interruption.
Main characteristics of the franchise
In its essence, the franchise is a system of relationships
that consists of the transfer paid by one party (a company that usually has a
strong image and a great reputation in the market for goods and services) to
the other party (a company or an individual private entrepreneur) of their
means of individualization of the goods produced, the works carried out or the
services provided (service brand, corporate identity), business technology and
other commercial information, the use of which by the other party will
contribute to the business technology development. In this case, the transferor
agrees to provide support for the establishment of the company and to provide
technical and consulting assistance.
