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What does franchising involve?

Posted on Wednesday, 10th February 2016 by

Whilst many have heard of franchising and understand that a franchise is a type of business structure, not everyone is aware of what they actually involve.

definition of franchise

 

 

 

 

 

The key feature of a franchise is that the Franchisor agrees to share his proven formula for success in his field of business with another (the Franchisee). As such, the Franchisor is agreeing to share with the Franchisee such things as his knowledge, experience and branding. In return, the Franchise usually pays to the Franchisor an upfront fee (to cover the set up costs of the new franchise) as well as an ongoing management fee and possibly contributing towards centralised advertising costs. A prime example of a franchise business is the fast food chain McDonalds where many of its outlets are owned and run by individual franchisees.

McDonalds is a franchise business

 

 

 

 

 

 

From a Franchisor’s point of view, his main concern is to protect his business interests (especially the reputation attached to his branding and successful business formula). The Franchisee is therefore almost always subject to tight control by the Franchisor and bound to strict confidentiality obligations.

The Franchisee on the other hand will want to make sure that the Franchisor has a proven track record in the relevant business and that what is being offered will allow him to emulate the Franchisor’s success. It is also important for the Franchisee to consider what the likely ongoing income, costs and fees of the proposed franchise will be to make certain that it can be profitable. Speaking to existing franchisees of the business is always recommended.

If you would like to talk to a specialist about franchising please do not hesitate to contact the Leicester business law team on 0116 266 5394.

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer.  If you are interested in obtaining advice, please contact one of our solicitors who will be happy and able to advise you on your own particular circumstances.

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The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

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