In a nutshell, franchisors make money by having successful franchisees. Franchisors should not make money from their network by charging a high initial fee with a large profit element. The purpose of the initial fee is to reimburse the franchisor the very substantial costs of recruiting and training franchisees, providing the initial obligations to enable […]
Not all franchises are premises based and those that are, often do not require retail premises. If a franchise requires a franchisee to have commercial office premises there is a large stock of such premises that are available and franchisees normally do not need any assistance from their franchisor. In a retail franchise the right […]
One of the essential features of franchising is that prospective franchisees want to own and operate their own business but want to do it safely by reducing the risks. Franchisors should have established a system that they can prove works and that substantially reduces the risks of failure for a small start up business but […]
Brands are an essential part of any franchise. Apart from receiving the franchisor’s know how franchisees make use of the brand that the franchisor has developed and hopefully during the term of the franchise that brand will become increasingly well known so that customers are attracted to franchisees’ businesses through the power of the brand. […]
In franchising there are two important documents. First, the franchise agreement which is a formal agreement between a franchisor and a franchisee. It is “written in stone” so that once a franchisee enters into the agreement it cannot be altered without the franchisor and the franchisee agreeing to make the alteration. The other important document […]
Franchisors charge an initial fee which is sometimes split between a “licence fee” for the rights to operate as a franchise and a “package fee” for equipment, stock and other items supplied by the franchisor. Franchisees need to make sure when they are comparing the initial fees of various franchisors that they include all initial […]
It is surprising how one little word can make quite a lot of difference! In most franchises franchisees are allocated a territory in which they operate and are authorised to seek customers. Sometimes that territory is referred to as “an area of prime responsibility” or a “catchment area” or some other language is used. In […]
To a certain extent the answer depends on what it is that you and your family member are intending to do, but bear in mind that the franchisor will want to know precisely who it is dealing with as its franchisee. In other words franchisors do not like and generally will not allow silent partners. […]
The general rule is that franchisees pay franchisors a continuing fee of, usually, 10% of sums received and sums receivable by a franchisee. Of that 10% normally 2% is allocated to a marketing levy which creates a marketing fund to build up the brand’s reputation. The remaining 8% is retained by the franchisor and includes […]
At one level there isn’t much difference because a franchise is simply a “tough” licence under which the licensor imposes a great deal of obligations on its licensees and regulates every aspect of how the licensee operates its business. It is for this reason that businesses who are thinking of franchising need to establish whether […]
