Business-format franchising, according to the British Franchise Association (BFA), is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and make use of an entire business package.
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It is a truism that the majority of franchisors that are able to join the BFA do so. The many benefits range from ongoing exposure to best practice and developments in the industry to being counted amongst the band of ethical franchise practitioners.
The franchise contract is the document in which the whole transaction is drawn together. It must accurately reflect the promises made and it must be fair, while at the same time ensuring that there are sufficient controls to protect the integrity of the system.
This sample agreement is for illustrative purposes only and must not be used by any party seeking to franchise their business without taking the author’s prior advice. See also master franchise contract.
Everyone going into business will sooner or later need to get to grips with the figures. With franchising you should be looking at a tried and tested business format, so you should be provided with projections showing how the business could perform.
Risk management by franchisors is an essential part of their international strategy and roll-out process. Those who fail to identify, reduce, and then manage the remaining risk do so at their peril. They should anticipate spending large amounts of time and money seeking to extricate themselves from the quagmire of litigation.
Despite the recession, it is clear that financial assistance for franchises is readily available from banks specialising in the sector. Apart from a strong business proposal what is it that the bank manager will be looking at when applicants present them with their business plan?
A franchise relationship should be capable of withstanding the test of time. Indeed, the lack of failure among franchisees, as highlighted annually by the NatWest/BFA survey, is one of the strongest selling points of franchisors.