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What are key considerations franchisees should entertain in entering into a franchise agreement?
EncofBizandFinance
Potential franchisees need to determine not only what protection they will receive for their earnings if they are successful, but also what obligations they will be responsible for if the franchise fails.
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∙ 13y ago
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What support will franchiser give to the franchise?
The level of support given by a franchisor to its franchisees differs between franchisors and franchise systems. The relationship between a franchisor and its franchisees, including the level of support to be provided to is franchisees, is primarily governed by the terms of the franchise agreement. The franchise agreement should contain specific sections whereby the franchisor's "support" obligations are identified and defined. Typically a franchisors "support" obligations relate to (a) initial training and (b) ongoing support respecting the day-to-day operations of the franchise business, including administrative activities, marketing and management. When entering into a franchise relationship, prospective franchisees must recognize that the terms of their franchise agreement may be "broadly" drafted and that the franchisor's on-going "franchisee support" obligations may not be clearly defined. Accordingly, prospective franchisees must reach potential "franchise opportunities" and engage in a detailed due diligence investigation that should include contacting and speaking with existing franchisees to inquire as to that franchisees satisfaction with the level of support and training that has been provided by the franchisor.
What are the drawbacks of franchising to franchisees?
franchisees must pay to use the franchiser's name, products, and assistance. Usually franchisees must pay a one-time franchise fee as well as continuing royalty and advertising fees,
When your profitable franchise fails simply because other franchisees have failed this is known as the?
Royalty rate
What is the disadvantage of franchising for the one-unit franchisee?
When comparing "single unit franchisees" (i.e., a franchisee operating only one franchise location) to "multi-unit franchisees" (i.e., a franchisee operating more than one franchised location) one "disadvantage" of being a "single unit franchisee" (as compared to a multi-unit franchisee) is the fact that there will be a reduced opportunity for achieving additional profits resulting from the "economies of scale" typically experienced by successful multi-unit franchisees. That is, for the experienced and competent multi-unit franchisee there are certain cost savings and efficiencies generated through the efficient management of multiple locations. In terms of negotiating the terms of the franchise agreement (and your rights as a franchisee) as a "multi-unit" franchisee you may possess more bargaining power as compared to a franchisee purchasing a single unit. An additional benefit of multi-unit franchising may also relate to the additional protections that you may be afforded in the "protected territory" that may be negotiated and included in your franchise agreement. For example, multi-unit franchisees may possess the advantage of controlling a defined geographic territory and, thereby, minimize competing franchisees from within the same franchise system.
If you are a franchisee in one concept can you buy another franchise?
When you become a franchisee, one important obligation that you (as the franchisee) undertake and agree to is a restrictive covenant that, depending on the terms of your franchise agreement, will restrict you from purchasing and/or operating other types of businesses. It is possible for a franchisee of "one concept" to purchase another franchise concept however the only way to determine whether or not this is possible is to examine and evaluate the terms of your franchise agreement. If you are purchasing a franchise and have not yet signed a franchise agreement you should discuss with your franchise lawyer your future business plans and the types of restrictions and "restrictive covenants" contained in your franchise agreement.
What support will franchiser give to the franchise?
The level of support given by a franchisor to its franchisees differs between franchisors and franchise systems. The relationship between a franchisor and its franchisees, including the level of support to be provided to is franchisees, is primarily governed by the terms of the franchise agreement. The franchise agreement should contain specific sections whereby the franchisor's "support" obligations are identified and defined. Typically a franchisors "support" obligations relate to (a) initial training and (b) ongoing support respecting the day-to-day operations of the franchise business, including administrative activities, marketing and management. When entering into a franchise relationship, prospective franchisees must recognize that the terms of their franchise agreement may be "broadly" drafted and that the franchisor's on-going "franchisee support" obligations may not be clearly defined. Accordingly, prospective franchisees must reach potential "franchise opportunities" and engage in a detailed due diligence investigation that should include contacting and speaking with existing franchisees to inquire as to that franchisees satisfaction with the level of support and training that has been provided by the franchisor.
How to end a franchise agreement Gracefully at Contract Renewal?
Generally speaking, franchisors and franchisees have positive relationships. However, in rare cases when the relationship between a franchisor and franchisee does not feel right, terminating the Franchise agreement at renewal time may be the most beneficial move.
What are the drawbacks of franchising to franchisees?
franchisees must pay to use the franchiser's name, products, and assistance. Usually franchisees must pay a one-time franchise fee as well as continuing royalty and advertising fees,
When your profitable franchise fails simply because other franchisees have failed this is known as the?
Royalty rate
What problems might arise when a potential franchise in the process of evaluating a franchise attempts to consult previous franchisees?
There shouldn't be any problems. It is an appropriate and suggested action when looking at investing in a franchise.
What is the disadvantage of franchising for the one-unit franchisee?
When comparing "single unit franchisees" (i.e., a franchisee operating only one franchise location) to "multi-unit franchisees" (i.e., a franchisee operating more than one franchised location) one "disadvantage" of being a "single unit franchisee" (as compared to a multi-unit franchisee) is the fact that there will be a reduced opportunity for achieving additional profits resulting from the "economies of scale" typically experienced by successful multi-unit franchisees. That is, for the experienced and competent multi-unit franchisee there are certain cost savings and efficiencies generated through the efficient management of multiple locations. In terms of negotiating the terms of the franchise agreement (and your rights as a franchisee) as a "multi-unit" franchisee you may possess more bargaining power as compared to a franchisee purchasing a single unit. An additional benefit of multi-unit franchising may also relate to the additional protections that you may be afforded in the "protected territory" that may be negotiated and included in your franchise agreement. For example, multi-unit franchisees may possess the advantage of controlling a defined geographic territory and, thereby, minimize competing franchisees from within the same franchise system.
What is The Term Of The Franchise Agreement?
The franchise agreement term is 10-year with a 10-year renewal option.
How do you form a franchise company?
There are many ways to go around for turning a business into a franchise or to build a franchise from the start. Once you can guarantee the market can work as a franchise because it has a systemized operating system, can provide a significant return on investment for franchisees, and possess the structure of a franchise company, then you can start the process of registering your business as a franchise.To form a franchise company you have to:Have a legal audit - check for trademarks including, brand name, logos, and property rightsDraft a pilot operation manual - this will guarantee that franchisees follow the franchisor's methods of operationObtain funding - look for loans, special funding from banks or other corporations to start the franchise companyProvide legal documentation - get all permits, licenses, and create your franchise disclosure agreementMarketing - start marketing the opportunity to potential franchisees
Where do you go if you have a franchise that's having trouble?
As a first resource, as a franchisee, you should be able to reach out to your franchisor or corporate offices to discuss any problem your franchise is having. This is why many franchisors offer ongoing support to their franchisees, this is something that is often specified in the franchise disclosure agreement. In the case that your franchisor or corporate office is unresponsive, you may seek help from your local state General Attorney, under the department of consumer affairs or the state securities division for guidance. Also, another government agency that can assist you in assessing problems with your franchise is the Federal Trade Commission, which sole mission is to protect consumers (including franchisees) of the market, work environment, and more.
How much does a licks franchise owner earn?
Nothing...In fact most Lick's franchisees lose money; some go bankrupt.
Can franchisees be considered entreprenuers?
That is exactly what they are. An entrepreneur is someone who takes a financial risk by investing in a business. There is always a franchise fee involved.
Where can you learn all about Franchising?
There is a lot of great information about franchising on the internet, but it can get overwhelming. Franchise Consultants are franchisees who provide a free consulting service to help individuals understand the industry and identify the best franchise for their requirements.
