Franchise Business Opportunity

In order the understand exactly what a franchise business opportunity is, it is important to learn what some of the terms are so as not have any misunderstandings

According the Wikipedia Franchising is a method of doing business wherein a “franchisor” authorizes proven methods of doing business to a “franchisee” for a fee and a percentage of sales or profits. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor, and may indeed be required by the franchisor, which generally requires audited books, and may subject the franchisee or the outlet to periodic and surprise spot checks. Failure of such tests typically involve non-renewal or cancellation of franchise rights.

The term “franchising” is used to describe business systems which may or may not fall into the legal definition provided above. For example, a vending machine operator may receive a franchise for a particular kind of vending machine, including a trademark and a royalty, but no method of doing business. This is called “product franchising” or “trade name franchising”.

A franchise agreement will usually specify the given territory the franchisee retains exclusive control over, as well as the extent to which the franchisee will be supported by the franchisor (e.g. training and marketing campaigns).

The franchisor typically earns royalties on the gross sales of the franchisee. In such cases, franchisees must pay royalties whether or not they are realizing profits from their franchised business.

Cancellations or terminations of franchise agreements before the completion of the contract have serious consequences for franchisees. Franchise agreement terms typically result in a loss of the sunk costs of the first-owner franchisees who build out the branded physical units and who lease the branded name, marks, and business plan from the franchisors if the franchise is cancelled or terminated for any reason before the expiration of the entire term of the contract. (Item 15 of the Rule of the Federal Trade Commission requires disclosure of terms that cover termination of the franchise agreement and the terms substantiate this statement)

source
http://en.wikipedia.org/w/index.php?title=Franchising&oldid=196634538

I hope this clears some things up, but comments are welcome if there are still any misunderstandings.

I think this reaffirms my previous posts that a franchise business opportunity is one that requires payment and royalties for use of the name and products you are going to be using in the franchise itself.

Carefully consider the terms of the franchise business opportunity as cancelling the agreement before the end of the terms can lead to some harsh penalties and consequences, including bankruptcy.

Tags: franchisors, franchise agreement, franchisee, royalties, franchise business opportunity