A Franchise is a licence to use a business idea belonging to another. The person selling the idea is known as the Franchisor and the person purchasing the right to use the business idea, and/or trade under the name of the organisation, is known as the Franchisee.
Considerations for a franchisor
- Business plan
- Costs incurred in setting up and maintaining a franchise network
- Level of profit expected
- Level of fees and the initial investment by franchisees
- Is there adequate working capital in place until the franchise fees materialise?
- Could the network expand and attract further franchisees?
- Marketing plan
Considerations for a franchisee
- The Company's history
- How long the organisation has been franchising and where
- Current number of franchisees
- Sources of company earnings
- Details of the training provided
- Realistic amount of capital that would be required
- Types and amount of advertising
- Any need to buy products from the franchisor?
- Are there target obligations that need to be met?
- Profit and loss figures
- Total cost in setting up a franchise