Franchise - Term Overview

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A franchise is a way of doing business in which you as a franchise entrepreneur enter into an agreement with the owner of a trade name.

Joining a franchise formula is therefore also a well-known solution for many entrepreneurs.

Franchisee Meaning: What is a Franchisee?

You may already know the meaning or definition of the word franchisee. Nevertheless, we will briefly explain it here. We give the word franchisee the following definition:

" A franchisee is an independent entrepreneur who concludes a franchise contract with a franchisor. After concluding the contract, the franchisee is given the right to exploit the franchisor's trade name for its own establishment or branch. "

Why become a franchisee?

Starting your own franchise branch is very interesting. It has many advantages over starting your own independent business.

We have listed the most important and most common advantages and disadvantages for franchisees for you here.

Advantages for franchisees

As a franchisee, you benefit from a number of advantages that make starting your own business very interesting.

1. Brand and product have been tested

A franchisee doesn't have to reinvent the wheel. The brand, product or service and the marketing activities have already been tested.

2. Regional, national or even international brand awareness

Consumers and companies are more likely to opt for a well-known name that has already proven itself, rather than an unknown name that is unknown

3. You run less risk

A franchisee joins a larger collective. You benefit from all the expertise and experience of the franchisor.

4. Guidance and advice

At the start of a new franchise branch, the franchisor will guide the franchisee well. It's important for both the franchisor and the franchisee that the new branch runs smoothly.

5. Focus on your branch

Franchisees need to waste little or no energy in purchasing, marketing and automation processes.

Disadvantages for Franchisees

Taking advantage of the benefits of a franchise comes at a price. This translates into more than just a financial price.

1. Less freedom

Purchasing from other companies is then not allowed, although this is cheaper in some cases.

2. Payment Obligations to Franchisor

Payment obligations are seen by most entrepreneurs as the most serious disadvantage. There are three types of payment obligations: entrance fee, royalties (also called franchise fee) and advertising contribution.

3. The franchisee also takes a risk

A proven recipe for a franchise formula does require an investment. Payment obligations are a risk factor. You can't just quit as a franchisee. This has financial consequences.

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