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Dec, 01 2008

Franchise success

How do you succeed in a franchise business? There is no short-cut to success in any business. However, you can taste success in your franchise business if you ensure that your spadework is done diligently and meticulously. You can a

  • Examine the franchisor and franchise: gather as much information as you can about the franchisor, which is possible only by asking the right questions.
  • Analyse and evaluate your options: franchisor`s answers to your questions, information gathered from the disclosure statement and a one-to-one interaction between the franchisor and the franchisee will form the basis of analysis.

Franchise advantage

What is the advantage of a franchise business over other businesses?

Well, if you have opted for a franchise business, you may have a reason for doing so. I can spell out a number of powerful incentives that may motivate you as a prospective franchisee to take up this business. Out of the many advantages, some are:

  • Time-tested success which is a result of years of trials and errors.
  • You are a part of a team rather than in an individual business, so help from experts in the business is imminent.
  • The reward of profit or personal gain is a strong incentive for the franchisee. Return and reward on your investment will compensate for your time and money invested.
  • Independence in this business is based on standardised procedures. This is especially beneficial for salaried people who leave their jobs to get into a business.
  • Owning your own business is the greatest satisfaction - the satisfaction of enjoying the fruits of your hard work is an indescribable pleasure.

Franchise agreement

On what legal parameters is a `franchise agreement` drafted?

A franchise agreement is essentially the very basis of defining the franchise relationship between the franchisor and the franchisee. The legal agreement which governs the relationship is termed as a franchise agreement. In the absence of any well-defined specific legislative enactment or rules governing franchising in India, it is of paramount importance that the franchise is structured in such a manner, that it fits around the rules and regulations that best protect the interest, rights and obligations of the parties to the agreement. Prior to entering into a customised franchise agreement, one needs to ensure that the agreement aims at the following:

  • Defines and describes the rights of the parties
  • Sets the framework for the conduct of the parties to the relationship
  • Regulates the relationship between the franchisor and the franchisee
  • Monitors quality and standards
  • Protects the Intellectual Property
  • Offers protection and recourse to the franchisor and the franchisee against breach of agreement by either party

Franchisor`s obligations

What are the typical clauses that govern a `franchisor`s obligations`?

The typical clauses which govern a franchisor`s obligations are:

  • Disclosure of business system
  • Defining the start-up procedure
  • Not to derogate from the commitment of providing the franchisee with the business traits
  • Supply of training
  • Supply of ongoing support to the franchisees
  • Consultation with franchisees
  • Availability of key franchisor personnel to the franchisee
  • General advertising
  • Maintenance of Intellectual Property
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