Franchise Guide

Franchise

Franchise – Definitions of the term

What is the best way to define the word "franchise"? The European Franchise Federation (EFF) describes a franchise or franchising as "a mode of distributing goods or services based on a network of independent partners. Franchising operates on the basis of a contractual agreement between two independent business parties, the franchisor and the franchisee, in which the franchisor grants the franchisee, for the term of the contract, the right to buy and operate the franchisor's branded and formatted business system for a fee and according to the prescribed rules and procedures developed for the system by the franchisor." [source: www.eff-franchise.com].

The British Franchise Association describes franchising as being “the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.” [source:  www.thebfa.org]

In a further definition, franchising is described as being “a method of doing business wherein a "franchisor" authorizes proven methods of doing business to a "franchisee" for a fee and a percentage of sales or profits. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor, and may indeed be required by the franchisor.” [source: en.wikipedia.org/wiki/Franchising].

Besides the above-mentioned definitions concerning the franchise business format, the term “franchise” can also be found in the field of sport, media and insurance where has completely different meanings. More information about these terms can be found at en.wikipedia.org/wiki/Franchise

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