Franchising
Franchising is a business practice where a company licenses its business model to another company, or more precisely, where the franchisor licenses some or all of its knowhow, procedures, intellectual property and other rights to sell its branded products and services to a franchisee. In return, the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a franchise agreement.
The word franchise is of "Anglo-French" derivation - from franc, meaning "free" and it is used both as a noun and as a transitive verb.
For the franchisor, use of a franchise system is an alternative business growth strategy, compared to expansion through corporate owned outlets or "chain stores". Adopting a franchise system business growth strategy for the sale and distribution of goods and services minimizes the franchisor's capital investment and liability risk.
Franchising is rarely an equal partnership, especially in the typical arrangement where the franchisee is an individual, unincorporated partnership or small privately held corporation, as this will ensure the franchisor has substantial legal and/or economic advantages over the franchisee. The usual exception to this rule is when the prospective franchisee is also a powerful corporate entity controlling a highly lucrative location, and/or captive market. For example, a large sports stadium in which prospective franchisors must then compete to exclude one another from. However, under specific circumstances like transparency, favourable legal conditions, financial means and proper market research, franchising can be a vehicle of success for both a large franchisor and a small franchisee.
Thirty-six countries have laws that explicitly regulate franchising, with the majority of all other countries having laws which have a direct or indirect effect on franchising.
Franchising is also used as a foreign market entry mode.
The Party EP
- 2006-01-01T00:00:00.000000Z
Oversummer
- 2005-09-21T00:00:00.000000Z
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