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Get to Know What Franchising Means Franchising refers to giving permission to another business by the mother business to produce, sell or deal in products similar to those of the mother company for an agreed period. The franchise could be simply compared to leasing or renting for an opportunity. The Mother Company is now referred to as the franchisor while the business that gets the permission to operate is called the franchise. To be allowed to operate the franchise is supposed to pay the franchisor specific amount. To be given the green light to operate the franchise is supposed to meet certain financial commitments. Trademark’s royalty, the cost of training and advisory services and a percentage of each unit sold are the three financial commitments that the franchisee must meet to be allowed to operate by the franchisor. The fate of the franchisor heavily depends on the franchisee success or failure. The operation of the franchisee is limited. It is possible to renew the franchise agreement. The franchisee is also required to operate in a given location. Every party to the franchising concept is charged with a different role; the franchisor is obligated with protecting the trademark while the franchisee is charged with the role of carrying out the services that entail the trademark.
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Franchisees could exist as single or multi-franchisee. The franchise that operates more than one unit is called a multi-franchise while a franchise that operates one unit is called a single franchise.
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The franchisor and the franchisee must agree on what number of units to be franchised, the time frame for their operation and the geographical area from where each and every unit will operate from. A unique agreement for each unit of the franchise is set. The popularity of multi-franchise is very high. Over the many years that the multi-franchises have been in existence they have gained popularity. Multi-franchise requires high levels of investments. High level of stability is provided by the multi-franchises. They are also very likely to be successful since they operate in diverse locations. Multi-franchises achieves more than original franchises. A single franchise might be disadvantaged since it operates from one location. The success of multi-franchises lies in their popularity. With the success of multi-franchises the franchisors might want to cash in on that huge success by encouraging the multi-franchises to open more units. The other units of a multi-franchise might come into action to help a unit that might be lagging behind regarding performance. Good researchers should be done to establish the viability of multi-franchises. For the multi-franchise to thrive it is advisable to have ready cash and other forms of investments.