Franchising emerges as a format of mutual dependence which allows both the franchisor and the franchise to realize profits & benefits to each other’s mutual and, at best, equal advantage. First, let’s know the definition of franchise.
The franchisor is able to expand without further investment and, though the return is obviously lower than from expansion by ownership, he does receive an income from the franchise as well as getting both an outlet for his product and more muscle in negotiating the purchase of materials and equipment.
The franchisee, on the other hand, is able to concentrate his entrepreneurial skills at the sharp end of sales and customer service, while the administrative headaches of setting up the business are mitigated by the uniform nature of the format.
By the same token, he is saved, through feedback to the franchisor of the accumulated experience of other franchisees, from making the errors to which businesses are prone in their early, most vulnerable sieges.
This relationship is expressed in agreements; the purchase agreement and the franchise agreement. It naturally follows that a prospective franchisee must satisfy himself that the franchise on offer is a sound investment.
Close questioning of both the franchisor and existing franchisees along the lines of the points raised in this section will help with this appreciation.
Definition of franchise
“Franchising occurs when the franchise markets a product or service developed by the franchisor under an agreement and license to do so.”—— Arnold S Goldstein, 1989.
A franchise is the best defined as a continuing arrangement between the parent company and entrepreneur. It allows the entrepreneur to use all the know-how and experience of the pan company, such as the name, logo, production techniques, training methods, and expertise in general.’— Steinhoff & Burgess, 1989
“A contract or agreement, either expressed or implied, whether oral or Written between two or more persons, by which, a franchise is granted the right to engage in the business of offering, selling or distributing goods or services, under a marketing plan or system, prescribed in substantial part by franchiser and the operation of the franchise is business pursuant to such a plan or system substantially associated with the advertising or other commercial symbol, designating the franchisor its affiliate.” — California Investment Law
A contract or an agreement for a period of time [may be renewed] by which an individual is granted the right to engage in the business of another individual organization/company in exchange, sot benefits mutually agreed upon
The parent company is called the franchisor and the entrepreneur is called the franchise. The franchisor will contribute such things as a trademark, a reputation, known products, manager’s know-how, training, and perhaps equipment & sometimes financing. The franchisee then operates the business following the rules set by the franchisor.
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