Franchising 101

As defined by the International Franchise Association (IFA), a Franchise is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name with its business system. It also includes a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and business system.  

Technically, the contract binding the two parties is the “franchise.” However, the practice of creating and distributing the brand and franchise system is most often referred to as franchising. 

This is the IFA’s legal definition, which is very accurate. Now let me expand on some aspects of this popular business model a little further:

• The franchisor's responsibility is to first develop, and then continually improve on its own Business & Operating System.

• Secondly, the franchisor must transfer knowledge to the franchisee (in other words, teach and support), on how to operate the business successfully. This includes initial training prior to opening the franchise business as well as provide on-going training and support,  

• The franchisee must be capable of learning how to operate and then follow the brand’s business system.  

• Basically, these are the main facts: the franchisor creates and trains, while the franchisee learns and follows in order to replicate a concept successfully. 

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