Franchising is the practice of the right to use a firm’s business model and brand for a prescribed period of time.
The franchisor’s success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.
Elements of Franchising
- the franchisee operates a business according to a franchise system which is determined by the franchisor itself;
- the franchisor grants to the franchisee the use of its trademarks and any other intellectual property rights;
- the franchisor has the right to exercise continuous control over the franchisee’s business operations in accordance with the franchise system set;
- the franchisor provides assistance to the franchisee of training, marketing, business or technical assistance, or supply of materials, and any possible agreeable arrangement;
- the franchisee pays a sum of fee or some other non-financial consideration in return for the franchise; and
- the franchisee operates business separately from the franchisor.
Successful franchised businesses:
- 7 Eleven