The management philosophy and “culture” of a Franchisor is manifest in a variety of attitudes and interfaces between Franchisor's management personnel and franchise owners. Though the franchise relationship is governed by a contract, a contract cannot anticipate all contingencies or problems. It is essential for a successful franchise relationship that mutual trust and respect develops between Franchisor and Franchisee to supplement the contract. Initially, management must develop criteria for identification of high potential Franchisees and the patience to select qualified candidates. Management must include good motivators with … [Read more...]
Transfer of a Franchise
April 15, 2010 By Leave a Comment
Franchisors restrict transfers of their Franchisees in order to maintain control over the persons who operate them. Such restrictions should apply to the franchise agreement, ownership of Franchisee and the assets of the Franchisee’s business. Typically the Franchisor reserves the right to approve the transferee and the terms of transfer. The right to approve the terms of transfer is important to insure that the buyer of the Franchisee’s business does not substantially overpay for it, or accept burdensome payment terms, which could jeopardize his ability to operate the business in compliance with the terms of the franchise. Some franchise … [Read more...]
Franchisee Premises
February 28, 2010 By 4 Comments
Franchisors sometimes control the Franchisee’s business premises by leasing or subleasing the premises to the Franchisee or requiring the Franchisee to sign a collateral assignment to the Franchisor of the lease for his business premises. Control of the Franchisee’s business premises gives the Franchisor more effective control of the Franchisee and his business. The premises continue to be part of the Franchisor's network even if the Franchisee does not. However, such control increases the capital requirements of the Franchisor or involves contingent liability and administrative effort and cost, unless control is implemented by means of collateral … [Read more...]
Franchisors Controls
February 18, 2010 By Leave a Comment
Franchisors controls the sources from which their Franchisees purchase operating assets (equipment, fixtures, furnishings and signs) and goods and services required to operate the franchised business for one or more of four basic reasons: to control the quality and uniformity of the goods and services sold by the Franchisee, to assure sources of high and uniform quality goods at prices that are competitive with or lower than those available from other sources, to protect confidential information, to be profit center for Franchisor, These are legitimate reasons for controlling the sources of supply utilized by Franchisees, provided … [Read more...]
Franchising 101
January 29, 2010 By Leave a Comment
In a world in which business strategies and techniques are continually improving, superior customer relations and outstanding supplier relationships are critical. In many ways the franchise relationship is the definitive expression of this principle. A Franchisor and its Franchisees jointly contribute to a supply system for products or services focused on the customer. They obligate themselves to each other under an agreement and endeavor to establish a durable, long-term relationship that will impact virtually every aspect of their respective business and protect that supply system. Few other business arrangements are so all encompassing. … [Read more...]
History of Franchising
January 22, 2010 By 2 Comments
The word Franchise comes from the Old French meaning freedom or privilege. In the middle ages of Europe, the local lord would grant rights to hold markets or fairs. In essence, the monarch gave someone the right for a certain type of activity. They were the first Franchisors - and did not know it. In 1851, Isaac Singer accepted fees from independent salesmen to acquire territorial rights to sell his recently invented sewing Machine. The Singer Company began granting distribution franchises and was the first Company to write franchise contracts. In the late 1880's Cities began giving franchises to newly established electricity companies. Around … [Read more...]
Business Format Franchising
January 15, 2010 By 2 Comments
Companies choose to grow by granting a license to others to sell their product or service and this has advantages for Franchisees too: A Franchisee does not have to come up with a new idea - the Franchisor had it and tested it and continues working on new ones. If properly executed, franchising is a win-win situation. There are significant advantages to Franchisor, Franchisee and the consumer. For a prospective Franchisee, it represents an opportunity to own and operate a business involving a proven concept, product, or business format with a minimum of financial risk. For potential consumers, franchising provides a way to receive goods and services … [Read more...]
What is Franchising?
January 7, 2010 By 7 Comments
Franchising is the most successful business system in the world. Yet the vast majority of people, including many who are involved in this segment of free enterprise, don't have a true understanding of what franchising really is. Whenever you hear the word "franchise" you think of fast food restaurants like "Jollibee" or "McDonald's", but there is more to franchising than the two giants. Franchising is simply a special type of licensing arrangement for the distribution of services and products. Franchisors allow another entity - the Franchisee - to use their business system, trademarks and corporate identity for a certain period of time. It … [Read more...]
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