is a franchise?
to Meyer, H. in his book "Marketing", retail
sales define the franchises, concessions or licences
as a contractual agreement in which a main company (franchise
granter) gives another company (franchise holder) the
right to conduct business in his name under specific
can summarize in a simple way that a franchise granter
has the ownership and rights of the name or registered
trademark and sells a right to the franchise holder,
we acknowledge this a product license.
the most complex form, the license contract is a broader
and constant relationship that exists between two parts,
where very often, a complete range of services is enclosed,
including the selection of the place where the franchise
will operate, training, materials supply, marketing
plans and also financing aspects.
spectacular growth of the franchise holders represents
the rapid growth of two tendencies: the need of the
individuals to be their own bosses, fast, and the need
of companies to find more efficient and cheap ways to
H. and Kohns, S. establish that during the time in which
is valid a license agreement is called a conttract,
and it can range from five years to an unlimited time;
where the majority of agreements are for 20 years. After
the period has finished, the franchise granter very
often has the right to re-buy or re-sell the unit.
authors say franchises are a privilege given by an governmental
organization to an individual, a collective society
or anonimous company to use a public society, a street
or a road, or the space over or under the street or
road. The franchise can be by a fixed period of time,
for an indetermined time or forever.
to Phillips Kothler in his book "Dirección de la
Mercadotecnia(The Direction of Marketing)" the
concept of franchise is established as a concession
or agreement with the concession granter in the foreign
market, offering the right to use the manufacturing
process, tha brand, the patent, the commercial secret
and other value points, in exchange of fees.
you will find what the franchise granter receives in
return for his franchise:
franchise fee. It's a one time anticipated payment that
the franchise holders make directly to the franchise
granter in order to be part of the franchise system.
This payment reimburses the franchise granter the location,
qualification and training costs of the new franchise
sales fee, which is an annual payment, between 1% and
20% or more of the franchise holder's sales, which is
payed to the franchise granter. This payments represent
the costs of making business as part of a franchise
marketing fee. It is an annual payment, usually less
than 3% of the sales, that covers the corporate advertising.
profits for the sale of equipment, provisions, services
or products to the franchise holders.
to what we've seen, it would be wise to clear up that
not all franchise holders are successful since they
are tied up to the economy in which they develop. If
the economy grows, the franchises will also grow, in
the opposite scenario, when the economy of a country
or region does not grow or develop, the franchises will
not be able to grow. But if franchises are compared
to small business, the probabilities of survival are
better in the case of franchise holders, since many
numbers show that about 5% of the total of franchises
are discontinued every five years, compared to 50% of
new independent busineses.