WHAT IS A FRANCHISE?

A franchise is the agreement or license between two legally independent parties which gives:

1. A person or group of people(franchisee) the right to marke tap roduct or service using the trademark or trade name of an other business(franchisor)
2. The franchisee the right to market aproduct or service using the operating methods of the franchisor
3. The franchisee the obligation to pay the franchisor fees for these rights

The franchis or the obligation to provide rights and support

Types of Franchise Arrangements

Two types of franchis in garrangements:

✔ single-unit(direct-unit) franchise

✔ Multi-unit franchise:

1. Area development
2. Master franchise(sub-franchising)

A single-unit (direct-unit) franchise is an agreement where the franchisor grants a franchisee the rightsto open and operate ONE franchise unit.This is the simplest and most common type of franchise.It ispossible, however, for a franchisee to purchase additional single-unit franchises once the original franchise unit begins to prosper. This is then considered a multiple, single-unit relationship.

A multi-unit franchise is an agreement where the franchisor grants a franchisee the rights to open and operate MORE THAN ONE unit.

There are two ways a multi-unit franchise can beachieved:

✔ An area development franchiseor

✔ A master franchise.

Under an area development franchise, a franchisee has the right to open more than oneunit during a specific time, within a specified area. For example, a franchisee may agree to open 5 units over a five year period in a specified territory.

A master franchise agreement gives the franchisee more rights than an area development agreement.In addition to having the right and obligation to open and operate a certain number of units in a definedarea, the master franchisee also has the right to sell franchises to other people within the territory, knownas sub-franchises.Therefore, the master franchisee takes over many of the tasks, duties and benefits of the franchisor, such a sproviding support and training, as well a sreceiving fees and royalties.

Advantages:

✔ “Owning a franchise allows you to go into business for your self, but not by your self.”

✔ A franchise provides franchisees with a certain level of independence where they can operate their business.

✔ A franchise provides an established product or service which alread yen joyswide spread brand-name recognition. This gives the franchisee the benefits of customer awareness which would ordinarily take years to establish.

✔ A franchise increases your chances of business success because you are associating with proven products and methods.

✔ Franchises may offer consumers the attraction of a certain level of quality and consistency because it is mandated by the franchise agreement.

✔ Franchises offer important pre-opening support:

1. Site selection
2. Design
3. Financing(in some cases)
4. Training
5. Grand-opening program

✔ Franchises offer on going support

1. Training
2. National and regional advertising
3. Operating procedures and operational assistance
4. Ongoing supervision and management support
5. Increased spending power and access to bulk purchasing(in some cases)