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The True Role of a Franchise Agreement

The True Role of a Franchise Agreement

The True Role of a Franchise Agreement

Franchise opportunities are becoming more popular by the minute. The fast growth of the middle class population, as well as the rapid increase of disposable income have enabled a lot of people to spend their money on franchising endeavors. These industries have witnessed amazing growth for the recent years. There is no question that there are a lot of benefits entailed in owning a franchise business. Entrepreneurs have seen this coming. The mammoth of business franchising can offer is huge and there is a market out there to feed. Read on to further your knowledge about franchising opportunities and the true role of a franchise agreement.

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Most of the time, business entities offering franchise opportunities are hot brands, locally-known products or others that are known to have recall and awareness from their following. There are also international brands that entrust their franchise to cover a wider range of customers in the local market they are targeting.

One key advantage of franchising is the fact that you do not have to start from scratch. The brand and the products are already available for you to sell. There will be no struggle in terms of promoting or making people aware of your goods and services. By doing so, it is easier to rake profits and manage your expenditures when a structure is already in place and you just have to go around it.

The primary thing, however, that you need to take into account is the significance of a franchise opportunity and how you can integrate it to the local market. Aside from that, you need to learn the role of franchising agreement  as this is your guide to succeeding in your business endeavor.

What Is a Franchising Agreement?

The franchising agreement is a legally-binding contract between the franchiser and the franchisee. This exists to define the relationship between the two, as well as point out the rights and obligations of each. Now, what is in order to achieve a quality and healthy franchising agreement?

Emphasizing on quality, there should be a significance in franchising agreement arrangements basing on inherent commercial and operational procedures currently being manifested in such deals. There must exist a symbiotic relationship between the franchisor and the franchisee that is enclosed as effect of a quality franchising agreement.

The Purpose of the Franchising Agreement, Its Characteristics and Significance

The true role of a franchising agreement is to secure both the franchiser’s and franchisee’s hand in the management of the business. It ascertains quality control procedures and mechanisms that are in adherence with the laws of the country.

Prior to the signing of your franchise agreement, it is very important to make sure that the franchisee takes the mold of your business concept. All the conditions must be set, along with the rigorous provisions, in reference to such cases or situations when there is a breach or non-adherence of the format of the business and the misuse of the brand, product or services offered by the franchisee. Everything must be stipulated in the agreement.

Aside from this, the franchising agreement is a powerful tool to secure the misuse of franchiser’s intellectual property rights. It also holds managerial control discretion over the franchisee, to allow the use of its business concept and protect the image of the brand.

Important issues must be raised in the franchise agreement. This includes the scopes and limitations of the license. It must unambiguously and effectively state the temporal and territorial scope of the business and inheritance of the license, the property rights and the business nature. Quality control measures, restrictions and quarterly audits must be agreed upon so as to keep the integrity of the brand. Consequently, the franchiser’s tools and training to support the franchising business should be qualified as well. This includes the explanation on product sources, types of products to be sold, training and appropriation of goods.

The above-mentioned characteristics must be present in a franchising agreement. Whenever you engage in a franchising deal, ensure that everything is covered before signing it. Be on the lookout for loop holes and premises that can possibly be unfair for your side, while also take time to put yourself in the shoes of the other and see if such provisions would be fair for their side. At the end of it, a healthy agreement is made powerful by two business entities who have respect for the brand, the business opportunity and the standards to be upheld as outlined in the agreement.

Whatever you do, whenever entering negotiations on a franchise agreement, you should be able to carry fairness and proportionality of risks so the franchise would succeed. This is what you need to put in your mind so you don’t get into a very unhealthy situation. Think all points for consideration through and your franchise business will prosper.

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