Advantage of Franchising

Advantage of Franchising

•The business you are franchising is already successful and is a proven idea. Usually, before offering the business for franchising, the original owners have already built it up and have already made it successful. Franchising, for them, is a way to expand the business; it is not a way to build the business from a small one to a big one.
•The brand name is already recognized and name-recall is already very easy. Plus the franchisor or the owner of the franchise will take it upon himself to promote the franchised name or product, which will benefit the franchisee.
•You may have exclusive rights to market the franchised products in your territory. One example is Starbucks Philippines. This one is franchised, yes, but the franchise belongs to just a single entity in the whole country.
•A franchisee will enjoy the benefits of being supported by the franchisor. This is part of the franchise agreement. In return for the franchise fee the franchisee pays the franchisor, the latter commits to support, to train, to share ideas and even manpower to the franchisee.
•Systems are already in place. From getting the supplies to cooking the food (if you’re franchising a fast food or a food cart business) to selling the products or services to summarizing your numbers and producing your financial reports, the systems are already there for you. You just need to follow them.
•You will get to leverage on the good name and purchasing power of your franchisor when it comes to sourcing your supplies from suppliers.

Franchising Terms

Listed below are the terms that we need to be familiarized when considering buying a franchise. It’s good to be familiarized with these words to better understand the business model and the documents you’ll be reading when going to sign a franchise contract.

Franchisor – is the one who owns the overall rights and trademarks of the company and the one who gives the permit ion to its franchisees to use the rights and trademarks to do business. The franchisor charges the franchisee an upfront payment called ‘franchise fee’ for the rights to do business under the franchise name. In most cases, the franchisor also collects royalty fee from the franchisee.

Franchisee – An individual that is granted a franchise, as to market a company’s goods or services in a certain local area.

Franchise Fee – Is the cost of entry when purchasing a franchise business. This fee is primarily paid upfront to the franchisor by the franchisees for the use of the rights and trademarks of the business and is used by the franchisor to fund the initial support required by new franchisees.

Franchise Agreement – is a legally binding agreement which outlines the franchisor’s terms and conditions for the franchisee. The franchise agreement also clearly outlines the obligations of the franchisor and the obligations of the franchisee. The franchise agreement is signed at the time an individual has made the final decision to buy the franchise.

Trademark – is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities. A trademark is usually a name, word, phrase, logo, symbol, design, image, or a combination of these elements.

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