Written by Team Farallon
Franchising is simply a method for successful business owners to expand their business and/or to sell and distribute goods and services through a licensing relationship. In franchising, franchisors (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with system, methodologies, contacts, goods, services and support.
A franchise agreement may be used by the owner of a business to set out the arrangement between the owner and the franchisee to establish proprietary rights and operating know-how relating to a particular business, for example a cafe selling coffee, a bakery, or a fashion wear label to allow the franchisee to operate a new business with the franchisor’s experience, wisdom and know how.
The franchise agreement will be required to address matters such as payment of franchise fees, licence to occupy and fitting out of premises, consultancy and other assistance, intellectual property rights, duration of the franchise agreement and exit and termination.
In addition to the franchise agreement, the franchisor should consider a Franchise Operations Manual to supplement the Franchise Agreement. There may be some areas of the business which are purely operational, logistical or administrative in nature. The franchisor need not put this information in the Franchise Agreement because these are just guidelines and best practices for the franchisee to follow.
A Franchise Operations Manual provides a superior advantage to the franchisor because he or she can control and retain the quality, branding and image of the business, especially when there are multiple franchisees, or franchisees internationally.
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