Franchises

Question 1

A _____ should be thought of as a method of conducting business that centers on a contractual relationship rather than a business entity.

Answer 1

a franchise

Question 2

What are franchises?

Answer 2

An existing entity may choose to become a franchise if they wish to distribute its products to a broader market w/ out the overhead costs of retail space, equipment, & employees.

Question 3

What do franchise agreements outline?

Answer 3

Franchise agreements govern the relationship b/w franchisee & franchisor surrounding:
1. term of the agreement
2. franchise fees
3. payment terms
4. ongoing investment/buying requirements
5. territory rights that usually provide the franchisee w/ an exclusive geographic area
6. commitments from the franchisee to follow operating protocol
8. royalties & other fees that the franchise must pay
9. franchisee termination/cancellation policies

Question 4

What oversees the regulation of franchises?

Answer 4

The Federal Trade Commission. FTC regulations is designed to ensure full disclosure of all info relating to a franchise company prior to a franchise investment.

At the state level, however, most states have implemented their own individual franchise rules & minimum disclosure requirements to supplement federal registration.