Since franchising is an ever-growing area of business, every day more and more people are turning towards franchising, but these people suffer because of lack of information. There is nobody to answer their questions which ultimately leads them to common mistakes. So today we answer some of the most frequently asked questions with respect to franchising. This is a like a layman’s guide to franchising
• What is franchising? Franchising is basically a business model which is developed, proved and tested by the franchisor who then, sells it to the franchisees for a fee. The franchisor gets his due for developing a good business model while the franchisee gets to use an already proven and tested model which reduces risk greatly and increases chances of success.
• What are its advantages? A franchise basically helps a franchisee by increasing his chances of success through reducing risks by using an already proven business model. Also a franchisee doesn’t need to start his business from scratch. Then franchisee also gets constant guidance from the franchisor on how to run his business. The franchisee gets to use the franchisors established brand name.
• What is a Franchise Agreement? A franchise agreement is basically a legal document which states the rights and duties of both the franchisor as well as the franchisee. This document is legally binding on both and should only be signed when one is comfortable with all its provisions. Usually expert legal advice is taken while preparing this agreement.
• What is a Franchise Fee? A franchise fee is the initial fee that the franchisee pays to the franchisor in order to use his business model. In return for this fee, the franchisee is given various services like help in training staff, management expertise etc. The franchise fee depends of the size of the franchise.
• What is the duration of a franchise? There is no fixed duration for a franchise. It varies from franchisor to franchisor. In some cases it can be 10 years while in others it can be 15 years.
• What are the different types of franchising? The different types of franchising are 1] Large scale franchising 2] Small scale franchising 3] Home-based franchising
• Does a franchise guarantee exclusive rights? No a franchise automatically does not guarantee exclusive rights. If you have exclusive rights, it will be clearly mentioned in the agreement. All franchisors do not provide their franchisees with exclusive rights.
• Can a franchise be terminated? Yes, a franchise can be terminated under specific circumstances which will be mentioned in your franchise agreement.