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Mar, 01 2008

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If you want to run your own franchised business, there is little point in going ahead until you have read enough about the business to make an informed decision. The advice is to read and absorb all you need to know about franchising, the franchisor and t

If you want to run your own franchised business, there is little point in going ahead until you have read enough about the business to make an informed decision. The advice is to read and absorb all you need to know about franchising, the franchisor and the viability of your intended business activity.

Franchise is an excellent way to do business for yourself, but not by yourself.

The word franchise literally means the rights of privilege granted. In this sense franchising offers people the freedom to own, manage and direct their own business. Franchising involves hard work, dedication, setbacks and long hours, as well as requiring a significant capital investment. It significantly reduces risks due to the application of a proven system.

What is franchising?

Franchising is a method of doing business. Franchising occurs when the operator of a concept or system (the franchise) grants an independent business person (the franchisee the right to duplicate its entire business format in a particular location (or country) for a particular location (or country) for a specified period of time. Other terms and conditions are set forth in the contract (franchise agreement). The franchisee has full access to all of the trademarks, logos, marketing techniques, controls and systems that have made the franchisor in effect, the franchisee acts as a surrogate for company owned store in the distribution of the franchisor`s goods and/or services.

The responsibilities have to do with the franchisee`s commitments and obligations – usually spelled out in a franchise agreement or contract with the franchisor. The word `system` is the key concept to franchising. It is important to keep in mind that the franchisor and the franchisee are separate legal entitles.

Three popular variations of the franchising model include:

Master franchising: The franchisor sells the development right in a particular market to a master franchisee who, in turn, sells individual franchisees within the territory. Model is used extensively in international franchising.

Area development agreement: The franchisor grants exclusive development rights for a particular area. Within its territory, the area developer may develop own individual units for or find independent franchisees to develop units.

Sub franchising: The franchisor grants development rights in a specified territory to a sub-franchisor and has no involvement with the individual franchisees in the territory.

What makes a winning franchise?

Picking the right partner on the outset followed by a strong sense of mutual trust, willingness to commit to long-term rather than short-term advantage and a binding, even-handed contract will represents a win-win solution for both parties.

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