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). Divinebeautytips

But the franchisor also undertakes to provide a number of services: supply of equipment, raw materials, technology transfer, personnel training , accounting services. Techcrunchblog

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. Nanobiztech

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.


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