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Features of Franchising

The salient features of a franchise are as follows:

(i)    The franchiser owns a trade or service mark and allows the franchisee to use it under a license.

(ii)    The franchisee pays for the license and becomes a part of the franchiser’s network. An initial payment has to be made and than a regular license fee. There may be an agreement on the percentage of sales or profit to be given monthly or annually by the franchisee to the franchiser.

(iii)    The franchiser provides all marketing support and proper equipment and systems for doing business in the required manner. Such company virtually sets up the business for the franchisee who is going to manage it.

(iv)    There is a clause in the franchise agreement for the franchisee to follow franchiser’s policies regarding modes of operation of business. The franchisee is also required to maintain a particular kind of décor in the place of business.

(v)    The franchiser may arrange training for the personnel working in the franchisee organization. This is very common in case of restaurants and fast food chains.
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