What is Franchising?
Franchising means in brief that anyone who owns a successful business concept, rent the right to use the business concept and brand to other entrepreneurs. It is a long-term cooperation which is controlled by the franchise agreement. Franchising is in other words a sales right and it is applied in basically every area of our economy in which the sale of goods and services and/or service.
Franchising is above all a business financial concept. The franchisor has documented its business concept in manuals and share their experiences to strengthen the marketing of their products or services and to grow geographically and size. The franchisee get the right to, for compensation, work under the franchisor ‘ s name and characteristics to sell goods or services and make a viable business.
The franchisee operates its own business and in general the ownership is entirely independent from the franchisor. A franchisee operates its business with the same business risk and opportunity for entrepreneurs who work without the protection of a franchise cooperation. The risk he takes is however lower because he is working in a proven and effective business concept. In addition the franchisee utilize the franchisor’s all experience and receive ongoing advice and support.
When you become a franchisee it is normal to have to pay a lump sum to the franchisor and then on a current basis pay a so-called franchise fee, which is often a percentage of how much one sells in the company. For a costumer who are buying goods or services it is almost impossible to see if the chain store or company they buy from is a franchise business or not.
Franchising is based on distribution of tasks
A franchise contracts is made between two parties with the purpose that everyone, thanks to this cooperation, will obtain the best results.
The various tasks that must be carried out to this objective must be distributed between the two parties. The franchisor undertakes the tasks that can best be carried out on a large scale. The tasks that are best suited to perform in smaller scale on the local market falls on the franchisee.
Why use franchising?
For the company who wants to expand, franchising often offers an unsurpassed alternative to expansion with for example own stores or sales office.
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