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How Franchise Accelerate Your Business Growth
Franchising is a method of distributing products or services. At least two levels of people are involved in a franchise system: (1) the franchisor, who lends his trademark or trade name and a business system; and (2) the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system. Technically, the contract binding the two parties is the “franchise,” but that term is often used to mean the actual business that the franchisee operates.
Mendelsohn (2004) highlights that most franchising definitions cover five basic elements namely: branding of a name, a system, granting of the right to use the brand name and system, the payment of consideration to the franchisor either directly or indirectly, and the ownership of an investment in the franchised business by the franchisee.
“In franchising, the franchisor, being the owner of business, grants exclusive rights to the franchisee for local distribution and sale of products or services using its trademark, business operational procedures and marketing plans. ”
Dr. Khairol Anuar Ishak
Author
In Malaysia, the most appropriate and broad definition is provided by the Malaysian Franchise Act 1998 which comprises all seven elements of franchising such as the grant of the right to use brand name, system or distributorship, branding of name (trademark), a system (procedure), the contractual relationship, franchisor obligation to franchisee, the payment of consideration from franchisee to franchisor and the ownership of an investment in the franchised business by franchisee
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Franchising is a method of distributing goods and services
Franchising involves a two party relationship in a contractual
Granting of the rights to use the brand name, service mark, trademark or trade name and system
Payment of royalties and fees (initial/franchise fees and ongoing support fees)
Specified location or area of operation over within a specified period of time
In sum, franchising can be defined as a legal agreement between the franchisor (the owner/creator of a system) and the franchisee (individual/company who is the recipient of rights or privileges by the franchisor) to operate the business of offering selling or distributing products or services by using the franchisor’s logo, business name, trademark or brand name based on a specified location and over a specified period, and in return receives a payment of fees or royalties paid by the franchisee.
