GCSE / O LEVEL / IGCSE COMMERCE : FRANCHISE

Franchise

A franchise is the name given to a business run by someone who purchases the right to use or sell the products or techniques of a well-known international or national company.

Companies that expand their business by offering others the opportunity to do business under their name are known as franchisors.

The people or companies purchasing the right to do business under that company name are known as franchisees

The owner of well-known business (franchisor) allows individuals (franchisee) to sell a product or service in a specific geographical area for certain payments.

It is a way of running a business or means of marketing a business

Franchise buys the local right to use a well known name, products and marketing of another company

Franchise Agreement

The legal contract between a franchisor and a franchisee. It sets out the conditions of the franchise.

This usually indicates a description of the franchise, the set-up-costs, the standard of the products or services provided, the help and support offered, the payment to be made and duration of the contract(usually five years).

Followings are some of the things include in the agreement:

Well-known name, brand or trade mark

Supply of the product or service

Assistant with site selection and obtaining planning permission

Setting up equipping premises

Initial training for franchisee and continuous training

Local and national advertising

Advice and assistance

Performance monitoring to make sure franchise continues to be profitable

 

Advantages	Disadvantages
Franchise business is based on an idea that has already been proved with an existing record of success.	Initial costs of buying the franchise can be high.
Brand name, logos and trademarks are   recognizable to customers.	The franchise agreement usually includes restrictions on how franchises should run the business.
Franchisee will benefit from any advertising or promotional activities carried out by the franchisor.	The franchisee cannot sell the business without the permission of the franchisor.
Franchisor offers support to the franchisee in the form of training, help with setting up the business, process manuals and ongoing advice services.	The franchisor can end the franchise arrangement without having to give any reasons or pay any compensation.
Banks may be more willing to lend money to a franchise.