A franchise is a legal and commercial relationship between the owner of
a trademark, service mark, trade name or advertising symbol and an individual
or group seeking the right to use that identification in a business.
The franchise governs the method of conducting business between the two
parties.
Generally, a franchisee sells goods or services supplied by the franchisor
or sells goods or services that meet the franchisor's quality standards.
Franchising is based on mutual trust between the franchisor and franchisee.
The franchisor provides the business expertise (i.e., marketing plans, management
guidance, financing assistance, site location, training, etc.) that otherwise
would not be available to the franchisee.
The franchisee brings to the franchise operation the entrepreneurial spirit
and drive necessary to make the franchise a success.
There are two types of franchises:
Business Format Franchise: In this type of franchise you are purchasing
a complete system for delivering the product or service and for doing business.
It is the system that produces consistency that is the basis of the franchise's
success. Examples include: McDonalds, AMMCO and Great Clips.
Product Distribution Franchise: In this type of franchise, the franchisee
sells products manufactured by the franchisor. Examples include: Coca-Cola,
Goodyear and Ford Motor Company.
