The partners in a franchise agreement are the franchisor, who grants the franchise license to the franchisee, who invests in it.
Remember, a franchise is NOT an independent business. The franchisee buys the opportunity to run a business based on the franchisor’s established operational methods, often detailed in an Operations Manual. These methods ensure that all the products and services offered by the franchisee conform to consistent quality standards.
An Operations Manual eliminates the need for the franchisee to create a strategic plan on how the business is run. The business logistics, such as marketing, product assembly, service delivery, accounting, store layout, employee recruitment and training, are all mapped out. Most franchisors provide extensive training to the franchisee to help ensure that the business is run according to proven methods, making it more likely to succeed.
The obligations of both the franchisor and the franchisee are fully laid out in the Franchise Agreement. Some franchisors use a standard agreement, and some are customised.
It is essential for any prospective franchisee to consult with a lawyer experienced with franchise agreements and business contracts before signing any of these documents.
The agreement will stipulate all the terms of the business relationship, such as initial fees, ongoing royalties, territory restrictions, operational support provided, the length of the franchise license, license renewal, and selling or closing the franchise.
When you buy a franchise, you are agreeing to uphold the franchisor’s way of doing business. In return, you gain the right to run an individual (or multiple) business unit(s) built on proven methods and with a high probability of success.
Franchise Success Story
A “Fruitful” Business
Coming from a background in market research, Chris Dellamarggio of Boston, Massachusetts, had been thinking about going into business for himself:
“I had an itch do something on my own,” he recalls. “I wasn’t really sure what I wanted to do, I just knew that I wanted to run my own business.”
While on a visit to New Haven, Connecticut, Chris chanced upon an idea that really appealed to him. He saw a new store, Edible Arrangements, which designs and delivers colorful and delicious arrangements made out of fresh fruit, and the idea clicked with him immediately.
Chris approached the company and asked about setting up a franchise in the Boston area. In 2001, he opened up his first Edible Arrangements store in the Boston area, and right from the beginning he found that the support he received from the company was indispensable:
“They were totally hands on – they gave me support at every level imaginable. I got help with everything from setting up the computers to laying the floor!”
Chris received full training in all aspects of the business, not to mention the delicate art of actually assembling the arrangements.
The first store was an incredible success, and Chris then went on to open a second. He is now actively investigating the possibility of opening a third store; and he is delighted that he made the right decision to go with an established franchise.