chapter 1 intro to franchising Flashcards
Owns trademark or trade name
FRANCHISOR
Uses trademark or trade name
FRANCHISEE
two main types of franchises:
- PRODUCT DISTRIBUTION
- BUSINESS FORMAT
simply sell the franchisor’s products and are supplier-dealer relation-
ships. In product distribution franchising, the franchisor licenses its trademark and logo to the franchisees but typically does not provide them with an entire system for running their business.
Product distribution franchises
not only use a franchisor’s product, service and trade-mark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals. Business format franchises are the most common type of franchise.
Business format franchises,
Two types of franchising arrangements:
✔ single-unit (direct-unit) franchise
✔ multi-unit franchise:
franchise is an agreement where the franchisor grants a franchisee the rights
to open and operate ONE franchise unit. This is the simplest and most common type of franchise.
single-unit
is an agreement where the franchisor grants a franchisee the rights
to open and operate MORE THAN ONE unit.
multi-unit franchise
two ways a multi-unit franchise can be achieved:
✔ an area development franchise or
✔ a master franchise.
a franchisee has the right to open more than one unit during a specific time, within a specified area. For example, a franchisee may agree to open 5 units over a five year period in a specified territory.
area development franchise,
gives the franchisee more rights than an area development agreement.
In addition to having the right and obligation to open and operate a certain number of units in a defined area, the master franchisee also has the right to sell franchises to other people within the territory, known
as sub-franchises.
master franchise agreement
The two main franchising legal documents
- DISCLOSURE DOCUMENT
- FRANCHISE AGREEMENT
is to provide prospective franchisees with information about the franchisor, the
franchise system and the agreements they will need to sign so that they can make an informed decision. it is also is designed to give you some of the information you need in order to make an informed
decision about investing in a particular franchise.
UFOC
True or False : By law, a franchisor cannot offer a franchise until the franchisor has presented the prospective fran-
chisee with a Disclosure Document.
True
is the legal, written document that governs the relationship and specifies the terms of the franchise purchase.
Franchise Agreement
