February 20, 2011 When considering an ownership role in business there are three common routes to choose from: starting your own, buying an existing firm or becoming a franchisee. If you’re lacking in years of business experience a franchise might be your best ticket into the business world. Franchising, in essence, is paying for permission to use another firm’s successful business model. It’s similar to leasing an apartment. There are two main parties involved in a franchising agreement: the franchisee and the franchisor. The franchisor lends his trademark or trade and accompanying business model to the franchisee who in turn compensates the franchisor with a royalty fee, and often an initial fee, for the right to do business under the franchisor’s name and use of the business model. Technically the contract binding the two parties is the ‘franchise’ but it also refers to the business the franchisee operates. |
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