FRANCHISING 101

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In a world in which business strategies and techniques are continually improving, superior customer relations and outstanding supplier relationships are critical. In many ways, the franchise relationship is the definitive expression of this principle.

A Franchisor and its Franchisees jointly contribute to a supply system for products or services focused on the customer. They obligate themselves to each other under an agreement and endeavor to establish a durable, long-term relationship that will impact virtually every aspect of their respective business and protect that supply system. Few other business arrangements are so all-encompassing. Unless a Franchisor and its Franchisee deliver to each other what they have promised, the supply system to the customer will be compromised.

The mutual commitment of the Franchisor and Franchisee to their network and resulting consistently high level of customer approval of their products or services easily recognize good franchise systems.

Franchising is a contractual relationship. The Franchisor and the Franchisee each make commitments and agree to operate under certain constraints. In the aggregate, these commitments and constraints constitute the structure of a franchise relationship. That structure must protect the Franchisor and all Franchisees of the franchise network and afford the opportunity and security of the Franchisee. There are a number of elements of the structure of a franchise relationship that are critical to its effectiveness as the foundation for an expanding franchise network.

Franchisors control the products and services that their Franchisees are permitted to sell in order to control the quality of the goods and services sold by Franchisees. Limiting the scope of the franchised business to those products and services that are within the scope of the Franchisor’s expertise and to preserve a uniform image. It is common for Franchisors to permit some Franchisee experimentation and variation because Franchisees are an excellent source of innovation, regional variations may be necessary and different customer bases may require variations in product or service mix or different emphasis.

 

 

 

(This disclaimer informs readers that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual.)

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