Ask “What is franchising?” and most people will say, “McDonald’s.” Franchising is much more than that. It is a way of delivering your goods and services, under your standards, using your brand, through independent business operators who use their own money.
In franchising, you expand your business by licensing certain rights to a third party. The third party will use those rights to open and operate his or her own business. In exchange, the third party will pay you various fees and grant you the right to control the way he or she operates the business.
Most often, the rights you will license are the rights to use:
The fees you will collect usually include an initial franchise fee, a weekly or monthly royalty, and an advertising fee. However, you should also consider less-obvious sources of income. For example:
Depending on your business, your income from these additional sources may be substantial, and may even surpass your income from royalties.
With respect to the control you exercise, you will usually set standards and specifications for all the significant elements of your business operation, including the products and services your franchisees offer for sale; the size, shape, and appearance of the franchisees’ premises; how the franchisees use your trademarks and service marks; how the franchisees advertise and promote the business; the qualifications and training of the franchisees’ employees; and the territories in which your franchisees may operate. You may also control your franchisees’ activities after they exit your franchise system, through the use of covenants not to compete, restrictions on their use of your confidential information, exercising of a right of first refusal to purchase their businesses, and similar measures.
The fees, rights, and controls listed above are common to almost all franchises; however, the structure of your franchise operation is limited by little more than your ingenuity, business sense, and ability to maximize your returns in the marketplace.
Our franchise law firm represents franchisors that range from experienced global franchisors to businesses that are first considering franchising. We can:
We can also assist you with issues that will arise once you become a franchisor. These issues include:
If you want to discuss whether franchising is right for you, contact The Johnson Franchise Law Firm today.