Simply put, it’s a way for business expansion that is an agreement between two parties. Typically, the one who owns the concept is the Franchisor. The party, who wants to buy in and help with the brand expansion by becoming an owner, is the Franchisee.
There are four main points of franchising.
Mark – The trademark is the brand that the Franchisor owns and protects, and the Franchisee agrees to operate under the guidelines of the Franchisor. The better the brand is protected, the better the franchise.
Territory – Trade areas around a franchisee that are protected from other Franchisees of the same brand of coming into the same area. This allows the Franchisee the greatest opportunity of success without being concerned about the Franchisor dropping another store across the street.
Support – The Franchisor provides systems and support to help launch the Franchisee in the right direction not only when they start their business, but for the length of the agreement.
Royalties – These are the payments paid from the Franchisee to the Franchisor. They are normally a percentage of the gross revenues and they can range from 4%-15% in some models.
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