Franchise is a right, which is highlighted in the contract, to conduct certain economic activities, using the principle of franchising.
Franchise business is governed by the contract of commercial concession. In his right holder, i.e., a franchisor must provide the user, i.e. the franchisee the right to enjoy exclusive rights. A franchisee has to pay the franchisor certain remuneration. Rights under the contract may be provided on a defunct term, or term may be omitted.
For exclusive rights include the right to the franchisor’s trade name, trademark, protected commercial information,etc. Under this agreement the franchisee can enjoy the exclusive rights, reputation and experience of the franchisor in a particular area and to a certain field of activity. This may be the realization of goods received from the franchisor or franchisee issued, keeping the other trading activities, services and more. By the way, the territory of a treaty may not be specified.
If all this information together, we can see that the essence of the franchise is very simple: a company that produces a certain kind of product or provides any services is developing quite successfully in the market, plans to expand its activities. Instead of opening branches everywhere, she sells her business experience and his reputation to other firms or individuals.
To buy a franchise, the franchisee will have to pay a lump sum company owner, whose sum is fixed and registered in a franchising agreement. This amount is calculated based on estimates of the economic effect, which can be obtained and future profits franchisee, when he will use the franchise. Moreover, its calculation can be made based on the amount of expenditure on the implementation of franchisor franchise.
In addition to the lump-sum payment, the franchisee must also make monthly payments – the royalties. It receives a franchise fee in the form of a certain rate. He expects them having assessed value of the right to use the trademark. Also, monthly payments may be a certain percentage of the profits franchisees. It can reach up to 15% of income.
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