Franchising is a business model where a company (the franchisor) grants the right to use its trademark, products, services, and operating systems to another company or individual (the franchisee) in exchange for an initial fee
and ongoing royalties. The franchisee operates a business using the franchisor's established methods and brand.
franchise business advantage and disadvantages?
Advantages of Franchise Business:
Established brand recognition and reputation
Proven business model and systems
Access to training and support
Marketing and advertising support
Potential for lower risk and higher success rate compared to starting a business from scratch
Disadvantages of Franchise Business:
Limited freedom to run the business as desired
Dependence on franchisor's supply chain and decision-making
Royalty fees to franchisor
Limited ability to innovate and differentiate
Restrictions on product offerings and services.
types of franchising?
There are two main types of franchising:
Business Format Franchising: Involves the franchisee using the franchisor's proven business model, including its products, services, trademark, and operating systems.
Product Distribution Franchising: Involves the franchisee selling the franchisor's branded products but operating independently with their own business model.
what is the rules?
The rules for franchising vary by country, but some common elements include:
Franchise Disclosure Document (FDD) outlining all terms of the franchise agreement and financial performance data
Restrictions on territory and competition
Obligations of the franchisor and franchisee, including training and support provided
Marketing and advertising contributions
Length of the franchise agreement and renewal options
Termination provisions
Dispute resolution process
Financial reporting requirements
Royalties and other ongoing fees paid to the franchisor
Legal compliance with franchise, labor, and consumer protection laws.
what does the franchisor provide?
The franchisor provides various support services to the franchisee, including:
Use of established brand and trademark
Proven business model and operating systems
Initial and ongoing training
Marketing and advertising support
Access to supplier networks
Ongoing operational and management support
Technology systems
Assistance with site selection and lease negotiation
Access to financing and business development resources
Ongoing research and development of products and services.
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