Franchising is essentially a practice that involves the distribution of goods and services for final consumers, whereby the owner - the Franchisor - of patented products grants to a third party the right (Franchisee) to use a certain business model for a defined period of time, with specific targets, and in a certain location. The franchisee is obligated to use the commercial logos and trademarks, the products, services and the business model that has been designed by the franchisor.
In exchange for the right provided, the franchisee has to pay the franchisor certain fees, including an entry fee, as well as marketing and royalty fees.
Once fees have been paid, franchisees can secure the store’s location, construction, layout and equipment, and go ahead with building the unit in accordance with the franchisor’s instructions.
The franchisor is responsible for supplying the franchisee with products or services, and for securing know-how, the unique business model, initial training and on-going support.
The franchisee is a financially and legally independent businessperson who runs the business under his or her own name, account and risk. However, the business must be entirely operated in accordance with the conditions laid down on the franchise contract. The concept of franchising assumes that franchisees abide by the management model that has been introduced by the franchisor. As a result, franchisees are not allowed to make unilateral decisions for matters that can possibly affect the business or the image and reputation of the franchisor or other stores belonging to that same network. According to business experts, franchising is the most successful expansion strategy. A franchise network ensures product high quality as well as frequent and timely renewal of product range. It is characterised by balance between quality and prices, increased reliability and recognised services.