Franchising - the answer to a maiden's prayer?
A young entrepreneur starting up a new business can afford to invest twenty or thirty years in the project. The mature entrepreneur must achieve success in a much shorter time-span.
Franchising offers a shortcut to success, though at a price, and many of the names we know on the high street and beyond are in fact franchises where small individual businesses (and some much larger ones) trade under the identity and brand of the franchisor whose brand and business model they use.
The European Code of Ethics for Franchising defines franchising as
...a system of marketing goods and/or services and/or technology, which is based upon a close and ongoing collaboration between legally and financially separate and independent undertakings, the Franchisor and its Individual Franchisees whereby the Franchisor grants its Individual Franchisees the right, and imposes the obligation, to conduct a business in accordance with the Franchisor's concept.
Codes of practice
The franchising model binds a small investor to a very strong partner with obvious advantages to both parties, but the relative strengths of the partners creates the potential for abuse. To protect the weaker party a number of Codes of Practice have been developed and the investor should reject any proposition that isn’t formally covered by the geographically appropriate code.
The European Code of Ethics for Franchising
…lays out a number of principles
- The Franchisor
- Must have developed a business concept and operated it with success of over a reasonable time period.
- Is the guardian of the concept and the initiator or the Franchising Agreement.
- Owns the ‘brand’ and all that goes with it
- Provides all the training and support necessary
Franchising is a complex business.
Consult a specialist lawyer before signing anything
- The Franchisee (you)
- must use your ‘best endeavours’ to develop and grow the business and to preserve the reputation and identity of the franchise
- Provide all the information the franchisor needs to monitor the business.
- Keep the franchisor’s secrets secure.
The Franchise Agreement
The European Code of Ethics requires that the agreement must define:
- the rights and obligations of the Franchisor;
- the rights and obligations of the Franchisee and the goods and/or services to be provided to the him;
- the terms of payment
- time related issues such as
- the duration of the agreement and the renewal terms;
- expiry or early termination
- rights to sell or transfer the franchised business etc
An Introduction to Franchising
Before purchasing a franchise, you must enter into a franchise agreement. Franchise agreements layout:
Uniformity
Most franchises have a degree of uniformity. You have to work within the parameters of the system that is built.
Before you enter into an agreement, you must know what you're able to change, and what must remain uniform in the franchise.
Products and Standards
The agreement will also tell you what products you are allowed to sell, and the standard of quality that is expected by you and your employees, and what will happen if you breach these standards.
Other Factors
What other information will be in the franchise agreement?
The Agreement
Entering into a solid franchise agreement is crucial for your success with your franchise opportunity.
Before entering into any agreement, it is very wise to consult a specialist lawyer. He or she will assess the business franchise information, and offer an expert opinion on whether the terms are reasonable or not.
Conclusion.
A franchise agreement gives you all the business franchise information you will need to make a decision on whether to enter into the franchise opportunity or not.
By having a basic understanding of what a good franchise agreement entails, and by hiring a franchise lawyer, you should be able to find the perfect franchise opportunity with the perfect franchise agreement.
Introduction When we, here
Introduction
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