| ign="center"> | | | | and ongoing support as well as statutory requirements |
| Franchising (from the French for honesty or freedom) | | | | and troubleshooting. |
| is a method of doing business wherein a "franchisor" | | | | Expansion |
| authorises proven methods of doing business to a | | | | After their brand and formula are carefully designed |
| "franchisee" for a fee and a percentage of sales or | | | | and properly executed, franchisors are able to expand |
| profits. Various tangibles and intangibles such as | | | | rapidly across countries and continents, and can earn |
| national or international advertising, training, and other | | | | profits commensurate with their contribution to those |
| support services are commonly made available by the | | | | societies. Additionally, the franchisor may choose to |
| franchisor, and may indeed be required by the | | | | leverage the franchisee to build a distribution network. |
| franchisor, which generally requires audited books, and | | | | Also with the help of the expertise provided by the |
| may subject the franchisee or the outlet to periodic | | | | franchisers the franchisees are able to take their |
| and surprise spot checks. Failure of such tests typically | | | | franchise business to that level which they wouldn't |
| involve non-renewal or cancellation of franchise rights. | | | | have had been able to without the expert guidance of |
| The term "franchising" is used to describe business | | | | their franchisors |
| systems which may or may not fall into the legal | | | | Training |
| definition provided above. For example, a vending | | | | Franchisors often offer franchisees significant training, |
| machine operator may receive a franchise for a | | | | which is not available for free to individuals starting their |
| particular kind of vending machine, including a | | | | own business. Although training is not free for |
| trademark and a royalty, but no method of doing | | | | franchisees, it is supported through the traditional |
| business. This is called "product franchising" or "trade | | | | franchise fee that the franchisor collects. |
| name franchising". | | | | In the United Kingdom, there are no franchise-specific |
| A franchise agreement will usually specify the given | | | | laws; franchises are subject to the same laws that |
| territory the franchisee retains exclusive control over, | | | | govern other businesses. For example, franchise |
| as well as the extent to which the franchisee will be | | | | agreements are produced under regular contract law |
| supported by the franchisor (e.g. training and marketing | | | | and do not have to conform to any further legislation |
| campaigns). | | | | or guidelines. There is some self-regulation through the |
| The franchisor typically earns royalties on the gross | | | | British Franchise Association (BFA). However there |
| sales of the franchisee. In such cases, franchisees | | | | are many franchise businesses which do not become |
| must pay royalties whether or not they are realizing | | | | members, and many businesses that refer to |
| profits from their franchised business. | | | | themselves as franchisors that do not conform to |
| Cancellations or terminations of franchise agreements | | | | these rules. There are several people and |
| before the completion of the contract have serious | | | | organisations in the industry calling for the creation of a |
| consequences for franchisees. Franchise agreement | | | | framework to help reduce the number of "cowboy" |
| terms typically result in a loss of the sunk costs of the | | | | franchises and help the industry clean up its image. |
| first-owner franchisees who build out the branded | | | | On 22 May 2007, hearings were held in the UK |
| physical units and who lease the branded name, | | | | Parliament concerning citizen initiated petitions for |
| marks, and business plan from the franchisors if the | | | | special regulation of franchising by the government of |
| franchise is cancelled or terminated for any reason | | | | the UK due to losses of citizens who had invested in |
| before the expiration of the entire term of the | | | | franchises. The Minister of Industry, Margaret Hodge, |
| contract. | | | | conducted hearings but resisted any government |
| Quick start | | | | regulation of franchising with the advice that |
| As practiced in retailing, franchising offers franchisees | | | | government regulation of franchising might lull the public |
| the advantage of starting up a new business quickly | | | | into a false sense of security. The Minister of Industry |
| based on a proven trademark and formula of doing | | | | indicated that if due diligence were performed by the |
| business, as opposed to having to build a new | | | | investors and the banks, the current laws governing |
| business and brand from scratch (often in the face of | | | | business contracts in the UK offered sufficient |
| aggressive competition from franchise operators). A | | | | protection for the public and the banks. |
| well run franchise would offer a turnkey business: from | | | | If you are interested in a franchise opportunity why not |
| site selection to lease negotiation, training, mentoring | | | | contact Martin & Co for more details. |