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Franchising can be defined as a system based on a close and ongoing collaboration whereby a company the franchisor gets into partnership with one or several companies the franchisees Its prime aim is to develop a franchise concept designed in the first place by the franchisor Internet 1In order to better understand the concept of franchising I will first explain several commonly used terms in this conceptFranchise is a legal agreement that allows one organization with a product idea name or trademark to transmit some rights and information about a business to an independent business owner which in return pays a fee and royalties to the ownerFranchisor is a company that owns a product service trademark or business format and provides this to a business owner in return for a fee Franchisor often is the one that makes the conditions under which a business owner operates however he doesnt control the businessFranchisee is a business owner who purchases a franchise from franchisor and operates a business using the name product business format and other items provided by the franchisorFranchise fee is a one time paid fee by the franchisee to the franchisor and is paid for rights to use trademark management assistance and some other servicesRoyalty fee is a fee continuously paid by the franchisee to the franchisor- usually paid as a percent of gross revenue earned Franchise trade rule is a law by the Federal Trade Commission that places several legal requirements on the franchisorsTrademark is a distinctive name orand symbol used to distinguish a particular product or service from all the othersIn practice we have four types of franchising- Product Franchise Manufacturing Franchises Business Opportunity Ventures and Business Format Franchising In the case of Product Franchise manufacturers use the product franchise to govern how a retailer distributes their product The manufacturer grants an owner of the store the authority to distribute goods by the manufacturer and he is allowed to use the name
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