A franchised business is one that is modelled;
- As a structured, replicable commercial system by a founder/conceiver company, “the franchisor”.
- Which will be contractually sold to independent entrepreneurs, “the franchisees”, with the purpose of them growing their business. They are legally, financially and fiscally independent of the franchisor.
- The franchise network is made up of the franchisor and all of the franchisees.
A franchise company may operate several channels of distribution in parallel: franchising (in brick and mortar outlets or mobile vehicles), company-owned outlets, direct selling, etc. E-commerce is developing as a channel that cuts across the others. Its potential needs to be integrated to a company’s overall strategy.
To be recognised as a proper franchise, the system must be founded on the following essential and constitutive elements:
- A brand name.
- Knowhow developed by the franchisor and destined to be transferred to the franchisee as part of the transacted franchise package whose purpose it is to provide him with a business package with which he can start to operate more quickly and with facilities that a stand-alone start-up would not have. The franchisor must continue to develop the knowhow to maintain the brand & system’s competiveness on the market. The knowhow that the franchisor will develop is twofold: that what is needed for the internal business of the head company, and that what is designed to be transferred to the franchisees.
- The initial and on-going assistance to the franchisees during the term of the contract.
Source: EFF European Franchise report 2012.