Franchise - What Is An Internet Franchise?

A franchise is a type of business entity in which franchisees contract with an existing

company to sell proven successful products or services under the originator's trade name or brand. There are normally fees involved. Fees can include direct franchise fees, a portion of sales, or other forms of compensation in exchange for having access to the franchised company's promotional material, methodologies, products, and/or guidance. In short, when a new business owner wants the ability to capitalize on national brand recognition, ongoing marketing activities, and a proven business model, the purchase of or contract for a franchise license can be a smart way to financial independence with reduced risk.

Numerous successful business models and products are franchised every year. The benefits of a franchise business, in terms of benefits for the franchisee, are accessibility to proven sales strategies, marketing plans, brand recognition, and ongoing product development. The benefit to franchised businesses or products is increased sales through a larger marketplace or access to previously untapped or under tapped markets. Provided the license to franchise is fair and equitable to both parties, the arrangement can be a win-win for both the franchisor and the franchisee.

For those new to the idea of franchising, or who are considering a franchise contract, the following tips from SCORE and similar business development organizations may provide helpful information that can avoid common pitfalls.

1.A franchise is not a partnership in the legal sense. While many distributorships and other forms of franchised businesses will offer help and guidance to new franchisees and ongoing support for existing or established franchisees, the legal relationship is not a partnership. Rather, you are the franchisor's customer. It is in their best interest for you to succeed, but they are not responsible for your success or failure.

2.Different franchisors offer different levels of support. You may have an ongoing relationship with a dedicated company representative or you may not. The company's involvement with your operations, beyond following contract rules and abiding by the terms of the franchise, are limited only to what is listed in your franchise contract.

3.The Federal Trade Commission (FTC) regulates franchise operations in terms of income claims and franchise disclosure documents (FDD). Be sure you know your rights as a franchisee and thoroughly review contract specifics before signing on. The FDD should disclose franchisor history, including past bankruptcies, as well as financial arrangements and responsibilities, obligations of both the franchisor and franchisee, as well as list current and past franchisees.

by: Paul Carlotta

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