08 Sep, 2017

Franchise Requirements

In a franchising system, a business basically expands itself to different locations in order to widen the distribution of products and services that are trademarked under its brand, and permits individuals under a contract to become independent suppliers and marketers of its products and services. In return of the services provided by the franchisee, the franchisor allows the individual to benefit from its time tested business plans and strategies, support program, training sessions and also permission to do business with the public under its brand. You will come across a variety of businesses which are using the franchising model, including fast food, mail delivery, retailers, fitness clubs and automotive industries. In order to avail the franchising opportunity from the business, a franchisee is required to meet certain requirements as laid down by the franchisor in order to conduct business. A few of these requirements are discussed below. If you are planning to opt for a franchising program, you will be required to follow the terms and conditions of the contract signed between you and the franchisor under all circumstances. Moreover, this contract is signed to last for a limited period of time, with most companies choosing to lease the permission to use their brand name for a period of minimum 20 years, after which they will be expected to renew the entire contract. After the renewal, they may add another many years till the contract expires again. If a franchisee fails to meet the terms and conditions laid down in the contract, the franchising company may also charge penalties and in extreme circumstances, may even consider nullifying the contract altogether. A very important requirement is the payment of the franchise fees and other relevant amounts to the franchising company by the franchisee, as a payment for availing the right to use the company’s brand name to sell the products and services and to do business. The amount will vary between different companies, and are proportionate to the popularity of the brand itself. All franchising businesses want their franchises to be a success and do great business. This is why, they are always concerned about the franchisee’s own experience in the relevant industry, and a few major companies set this as a basic requirement. However, many franchises do encourage new entrepreneurs to apply for the franchise program, and provide with training services for an additional amount. Another crucial requirement is the financial condition of the franchisee himself, and his ability to run the business without suffering from financial instability. Major brands require their franchisees to have a certain amount which may run into millions of dollars to be a part of his liquid funds. This requirement is very fundamental in most franchising programs, and the amount varies with the cost of the operations of the franchise.