A franchise is both a collaboration and a form of marketing. Widespread, this economic model is growing. The franchise works from a contract that binds the franchisor and the franchisee. Today, more than 75,000 shops and points of sale are franchised in France. Why such an interest ? What are the benefits and limitations of franchising?
Franchising is therefore a mode of marketing. It may concern products and/or services. To set up a franchise, a collaboration contract, also called a franchise contract, is signed between the franchisor and the franchisee. These two parties are financially and legally independent.
Thanks to the contract, the franchisor authorizes the franchisee to operate a business while respecting a concept of which he is the author. He accompanies him in the launch of the company. The franchisee must respect the instructions and the concept of the franchisor. It pays an entrance fee and royalties.
There are several types of franchises. This economic model seduces and reassures. It is constantly progressing. According to the French Franchise Federation, the business model brings together:
The service franchise concerns the services that the franchisee must market taking into account the franchisor's instructions. The service offer is offered under the name of the brand, brand or trade name of the franchisor. The McDonald's fast food chain is the best example of a service franchise.
In the context of a distribution franchise, the franchisee is considered a reseller. Its role is to market the products manufactured by the franchisor. It can also be a set of products chosen by the franchisor. This is the case in franchised supermarkets. In the contract of a distribution franchise, there is a supply clause. The franchisor imposes the suppliers.
The production franchise is different from the distribution franchise. The franchisee markets the franchisor's products but must produce them independently. The manufacturing process is imposed and validated by the franchisor. Of course, support is in place to ensure that the concept is fully respected.
Becoming a franchisee requires creating a business. However, in this case, support is provided. This following is appreciated, which is why the franchise enjoys such great popularity. Once a franchise has been chosen, it is important to take stock of its possibilities and the feasibility of the project. Sometimes franchisors offer reviews or appraisals. Be aware that there are event fairs to find the best franchise and talk to franchisors about terms and contracts. It may be worth visiting another franchisee to find out more about the operation and conditions.
Becoming a franchisee sometimes requires a significant investment. This consists of a personal contribution and a global investment. Before starting, it is important to present the project to potential funders. With the franchisor, it is possible to make a Business Plan.
A franchisee is privileged compared to a traditional business creator. He does not start a project from scratch. It already has a concept and a reputation. The franchise also allows you to have customers from the start of the activity. The benefits are there at the opening and the franchisee knows his target market in advance. Because they are better supported, the bankruptcy of franchisees is rarer.
The goal of franchises is to successfully grow and become known. This is why an exclusivity clause is included in franchise contracts. The franchisor undertakes not to install other franchisees in the area in order to limit competition.
Franchisees can count on a follow-up at the time of the launch but also after. They can take advantage of training and even occasional help with management, marketing or human resources.
There are many benefits for franchisees and franchisors alike. The latter are taking advantage of opportunities to open more stores and more points of sale. They thus benefit from a better presence in the territory and increased visibility.
Franchisor investment is reduced because franchisees must partially finance the franchise. At the same time, a franchisor will be remunerated by each of its franchisees who must pay an entry fee, which covers all the expenses linked to the opening, as well as royalties which give it the right to use a brand or teaches.
A franchisee must plan an initial investment which can be substantial. In addition to this sum to be expected, he must pay the entry fees to officially join the franchise. Because the amount of this launch is high, it is not uncommon for entrepreneurs to give up.
The freedoms of the franchisee are very slim. He must respect his commitments and therefore the requirements of the franchisor at different levels. To ensure that franchisees comply with the instructions given, mystery shoppers are sent regularly. They point out the positives and the negatives.
If the franchisee does not wish to continue the partnership, the resale of the franchise and even the premises is very difficult. Franchisee and franchisor work together to find a successor.
In the vast majority of cases, when signing the contract, the franchisor and franchisee agree on the duration of the collaboration. This can be 5 years or 10 years. At the end of this period, the contract is renewed or terminated. It is also possible that one of the parties wishes to terminate the contract before its term.
If the franchisor wants a breach of contract, he must explain it. It is possible that the franchisee does not respect the terms of the contract or that he does not pay his royalties. The sale of the goodwill is also a reason for termination.
The franchisee can also request a breach of contract if the franchisor does not respect its obligations and commitments, if it faces financial difficulties or in the event of incapacity, invalidity and death.
