When a business gives permission to another business to operate in its products is what we call franchising. Leasing or renting for a business opportunity is what entails franchising. The Mother Company is now referred to as the franchisor while the business that gets the permission to operate is called the franchise. The right to deal in products of the original company is not free of charge. The original company requires to be paid a commission of what the franchise sells. The franchisor only allows the franchisee to operate only when trademark’s royalty, the cost of training and advisory services and agreement to pay a certain percentage of each unit sold are met.
When the franchise succeeds the franchisor also succeeds. The franchise only last for a particular period. However the franchise agreement could be renewed every time it expires. The franchisee is also required to operate in a given location.
The role of protecting the trademark belongs to the franchisor while the obligation of carrying out the services that the trademark entails belongs to the franchise.
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Two types of franchises exist- the single franchise and the multi-franchise. The franchise that operates more than one unit is called a multi-franchise while a franchise that operates one unit is called a single franchise.
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The number of units to the franchise, the time frame for each unit and the area for each unit to operate from must be agreed. Every unit in a franchise agreement carries with it a unique agreement which is different from all others.
The multi-franchise is very popular and they are in high numbers. Over the many years that the multi-franchises have been in existence they have gained popularity.
To set up multi-franchises high levels of investments are required. High level of stability is provided by the multi-franchises. Since the multi-franchises operate in diverse locations their level of success is very high. Single franchises may not be as successful as the multi-franchises. A single franchise might be disadvantaged since it operates from one location.
The success of multi-franchises lies in their popularity. When the franchisors realizes there is huge potential in multi-franchises they encourage the multi-franchises to open more and more units than before.
The other units of a multi-franchise might come into action to help a unit that might be lagging behind regarding performance.
It is advisable for anyone who wants to carry out multi-franchising business to carry out a good research to establish if the area they want to set up these businesses is viable for business. For the multi-franchise to thrive it is advisable to have ready cash and other forms of investments.