Franchising Tips

A Franchise is a privilege granted to an individual to make or market a good or service under a patented process or trademarked name. It is a conferred right to exist as a legal business entity within a particular jurisdiction and to exercise corporate powers.

A Franchisee is the one who purchases a franchise. He or she then runs that location of the purchased business. He or she is responsible for certain decisions, but many other decisions (such as the look, name, and products) are already determined by the franchisor and must be kept the same by the franchisee. The franchisee will pay the franchisor under the terms of the agreement, usually either a flat fee or a percentage of the revenues or profits, from the sales transacted at that location.

Franchisor is the company that allows an individual (known as the franchisee) to run a location of their business. The franchisor owns the overarching company, trademarks, and products, but gives the right to the franchisee to run the franchise location, in return for an agreed-upon fee.

Franchising Tips:

• Validate the franchisor's claims through the Association of Filipino Franchisors,Inc.
• Interview one or more franchisees, validate the truth or falsehood of the market and financial claims of the franchisor. In many cases, the sincerity of a franchisor is the key to the franchisee's success
• Find out if the franchisor has any pending legal cases with any of the franchisees, and if so, find out why.
• Before signing, ask a lawyer to review the franchise agreement. Make sure your legal counsel is satisfied with the agreement, particularly with the termination clause.
• Be aware that anything not written in agreement, even if promised by the franchisor, may not be fulfilled.
• Make sure that all your sources for funding are in place.