Who Is A Franchisor?
A marketing concept that can be used by an organization as a strategy for business expansion is franchising. Where applicable, a franchisor grants a franchisee a license to use all or part of its operational methods, intellectual property, business model, brand, and rights to market and sell its branded goods and services. In exchange, the franchisee agrees to pay certain fees and adhere to specific requirements, usually outlined in a franchise agreement.
A franchisor sells the right to use its name, expertise, and intellectual property to open outlets and sell goods or services. The original or already-existing company is the one who sells the license to utilize its name and concept.
What Are Some Of The Factors That Influence People’s Decisions To Franchise Their Business?
The most frequent justifications are a desire to use franchisees’ local expertise to expand into uncharted territory. As the franchisee will be accountable for the establishment costs of an outlet in his or her region, using funds provided by a third party is another justification for growth.
What Qualifies A Company To Be Franchised?
The franchise model concept has been adopted by numerous brands, while many others have attempted it and failed. A company can be franchised if it has a tried-and-true business plan that has shown to be successful, if the skills needed to run the business can be passed to a franchisee, and if the franchisee can afford to do so at it’s initial stages.
The company must also possess some distinctiveness that is difficult to replicate; it cannot be a “me-too” brand. Since franchising is a long-term relationship, the business model must have enduring strength.
What Distinguishes Franchising From Licensing?
A license agreement often grants a third party permission to sell or distribute a product on behalf of the owning company. This frequently has a strong product focus. Given that operational guidelines and reporting standards are in place in addition to sales and branding guidelines, a franchise agreement is more onerous.
A business format franchise offers a manual for running the company along with continuing support and training. A license agreement has very little room for ongoing support.
What Are The Rules The Law In Franchising?
Given the numerous pitfalls associated in franchising a business, it is critical to get professional advice.
Franchise consultants and lawyers can offer helpful counsel and help the potential franchisor create paperwork that complies with the necessary laws.
Additionally, since the brand is still one of the advantages of investing in a franchise, it’s crucial to create a recognizable corporate identity.
This needs to be created by a skilled designer or advertising firm.
To protect the franchisor and franchisees, the trade name and trademark must both be registered.
A franchise contract and disclosure statement must be in compliance with the Consumer Protection Act (CPA).
To prepare these documents, it is essential to work with an attorney who specializes in franchising.
How To Become A Franchisor In South Africa
You must register a private corporation if you wish to operate a franchise business. A visit to the CIPC website is the first step in starting a business in South Africa. You should expect to pay anywhere from R215 to R300 for it. The cost of reserving the name is one of these expenses (R50). After your business has been incorporated, there will be additional expenses, such as a required minimum amount to activate your business bank account.
