We all know about the existence of franchises, but most of us cannot determine the difference between owning something and having a franchise deal. It is a growing perspective in various industries, and according to statistics more than 12 different countries use this particular model.
It is most popular when it comes to food offerings and restaurants, but today’s franchise has entered the health industry and medical services as well as home healthcare among others.
If you want to understand the legal perspective of franchising before starting your donuts franchise you should know that it consists of a defined type of license that one business owner would provide to another. The core of franchising is the relationship between franchisor and the vast array of franchisees.
The franchisor will license operating methods as well as a trade name, which means that he/she will create a system for it. As soon as franchisee agrees to use the system as the business model, then the license will be complete. But let’s start from the very beginning:
What Is a Franchise?
According to law, the franchise is a form of the license, but it has to feature three essential elements:
- The business has to be associated with the franchise trademark.
- The franchise has to pay an initial or continuing fee for the ability to remain and enter the business
- The franchisor can exercise control and to provide additional assistance in case of requirements and needs.
Even though we’re talking here about the federal definition of the franchise, you should have in mind that the idea varies under state laws and it can include other elements that will change based on regulations.
If you are a business owner, you probably think whether it makes financial sense to include franchise within your business.
On the other hand, if you want to expand your brand and you do not have enough funds to do it yourself, you can talk with franchise lawyers that will help you analyze your business to see whether it can become a franchise or not.
If you want to learn more on franchising, you should click here.
Business Model
This particular type of business is similar to any other, but it features some regulations that a person needs to comply to before they acquire a franchise. For instance, franchisors will provide training, operating manuals, brand standards, marketing strategy, and quality control.
For example, the most popular franchise in the world is McDonald’s, and they are licensing intellectual property that include business systems and trademarks.
You have probably noticed that wherever you go to this particular restaurant it has to pass certain standards, The main company does not regulate each restaurant, but the franchisee that acquired the license has to do it.
The most valuable asset is the franchisor’s brand, and customers tend to decide whether they should choose service or not based on their previous experience as well as relationship and trust in the brand.
Consumers do not want to think about who is owning some business, because they wish to get services and products that they can relate the brand too. Therefore, franchising will allow entrepreneurs to operate and hold enterprises under brands that are already popular and recognized.
If you are working with a good brand, you will get both support and tools that will help you live up to the standards that will ensure customer satisfaction for both sides.
At the same time, they will expect from you to execute specific standards, and that is why they are investing lots of financial resources, energy and time to develop and promote their brands.
The Main Roles Of A Franchisor
The primary goal and role of the franchisor are to provide to a franchisee various forms of business support, as well as controlling the elements of production so that he can make sure that everything is based on set guidelines and systems that were created.
Apart from taking the provision of business support and owning intellectual property, the person that wants to make a franchise has to pay an initial franchise fee which is one time as well as royalty fee that will cover operating methods and trade name.
However, franchisors won’t take a role in the daily management of the business, because the person that makes the trade name and system is an independent operator and not just an employee.
That is the main reason why most franchisors tend to provide guides on HR, but still, as a franchisee, you will be able to schedule, compensate, hire and set employment practices and standards and you can discipline your staff without anyone’s involvement or input.
Even though some features are regulated such as food preparation processes and uniforms which are the part of brand standards, the rate of salary and other things are entirely controlled by the franchisee.
Check this link: https://www.wikihow.com/Buy-a-Franchise-Business to learn how to purchase a franchise business.
How To Grow A Business Through Franchising?
This particular system is a methodical approach that will help you expand your business and distribute services and goods through various outlets. The process depends on the relationship between local operator and brand owner, and those two have to team up together to expand the brand.
The relationship is based on the contract and even though both of them are sharing the same brand, each of the features different roles and responsibilities when it comes to practical senses. The franchisor works to provide the ability of more franchises that will support the existing one.
On the other hand, franchisee tends to operate and manage the individual business based on rules and regulations of a brand that both sides stated in a contract.
