Types of Franchising Michael Isakson Chairman of IFA International Committee
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Types of FranchisingMichael Isakson
Chairman of IFA International Committee
International Franchise Association (IFA)
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• the franchisee the right to the trademark
• the franchisee the right to use the operating methods
• the franchisee the obligation to pay the franchisor fees for these rights
• the franchisor the obligation to provide rights and support to franchisees
A franchise is the agreement or license between two legally independent parties which gives:
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• has a contractual relationship with the supplier • buys from the supplier and sells in smaller quantities • is familiar with local markets and customers
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A licensee to pays for the rights to use a particular trademark. Licensors are mainly interested in collecting royalties and supervising the use of the license, not influencing the operations of the business. Visit www.licensing.org.
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Product distribution franchises are simply supplier-dealer relationships. The franchisor licenses its trademark and logo to the franchisees but typically does not provide them an entire system for running their business.
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Business format franchises not only use a franchisor’s product, service and trademark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals. Business format franchises are the most common type of franchise.
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There are different types of franchise arrangements
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Franchisee has the right to open more than one unit during a specific time, within a specified area
AREA DEVELOPMENT FRANCHISE
•Franchisee has the right to open more than one •The franchisor grants the franchisee exclusive rights
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Franchisee has the right to open more than one unit during a specific time, within a specified area
MASTER FRANCHISE• Right, obligation to open,
operate a certain number of units in a defined area, the master franchisee also has the right to sell franchises
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Franchisee has the right to open more than one unit during a specific time, within a specified area
AREA REPRESENTATIVE• Buys a territorial franchise to
sell and service unit franchisees
• Does not contract with the unit franchisees, but does receive a portion of the initial and ongoing fees paid to the franchisor.
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Country Master Franchise - MOST COMMON
Franchisor
Master Franchisee
Sub-Franchisee
Sub-Franchisee
Or Direct Ownership
INTERNATIONAL DEVELOPMENT MODELS
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Area or Province Franchise Development Agreement
Franchisor
Area Developer
FranchiseeFranchisee Franchisee
INTERNATIONAL DEVELOPMENT MODELS
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Joint Venture License
Franchisor
Joint Venture (Franchisor & Third
Party)
Sub-Franchisee
INTERNATIONAL DEVELOPMENT MODELS
Joint Venture Owned Unit
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Direct Franchise - LEAST COMMON
Franchisor
Franchisee Franchisee
INTERNATIONAL DEVELOPMENT MODELS
Franchisee
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CONVENTION.FRANCHISE.ORG