Franchising!

Most people pair up the word franchising, with business

. However, franchisingis not a business itself, but a way of doing one! It is basically a marketing concepta novel method of distributing products. A franchisor is the supplier or owner who supplies products. They assign to different people (called the franchisees) the right to market their goods and allow them to use the business name for a given period of time. So franchising isa strategy that a company may use to capture market share.

The international franchise association defines the concept of franchising as a continuing relationship in which the supplier provides a licensed privilege to do business, plus assistance in organising training, merchandising and management in return for a consideration from the franchisee. The franchisorfranchisee relationship can be between a manufacturer and a retailer, a manufacturer and a wholesaler, a wholesaler and a retailer, or between a retailer and a retailer. The first two types include arrangements where franchisees can distribute the products within a specific location, in exchange for fees. The last two, however, differ becausethey use a setformat to conduct business. Thisensures consistency, standardisation, and uniformity,among other aspects. This type of franchising has increasingly gained popularity and has spread to every sector of the economy.

The franchisor lends experience, while the franchisees contribute the monetary investment and additional local market knowledge. In product distribution franchises, franchisees sell or distribute the franchisors products through a supplier-dealer relationship. The franchisor licenses its trademark and logo to the franchisees, but typically does not provide them with an entire system for running their business. A good example is the well-known company,Coca-Cola. In businessformat franchises, the franchisor licenses their brand to a franchisee for use with a predetermined way of conducting business. Franchisees, after they have signed the franchise agreement, are given access to not only a franchisors product and/or service, but also their trademark(s) and a complete method for conducting the business.

In short, franchising is a commercial marriage between groups of people who have specific relationships and responsibilities, and a common goal. It is nothing but a pooling of resources and capabilities. A franchisee invests assets in system to utilise a brand name and ongoing support. They work with the belief that they can be more successful by using someone elses brand and operating the business according to their method.

by: Franchise Accountants

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