WHAT IS FRANCHISE? FRANCHISE KYA HAI?

What is franchise? or franchise kya hai? is the first thing to know when anyone is looking to become an entrepreneur through the franchising route. Franchising has a different meaning to different people, so before going forward, it is essential to have clarity on its definition. Once this definition is clear, then it will enable everybody to be on the same page. We will look at its modern definition, i.e., the way it is practiced in today’s time.

For a franchising to work successfully, it needs to have two partners. One is a franchisee, and the other is a franchisor.

From the definition given above, we can define franchisee as someone;

(1) who is willing to work within the provided systems & processes of a brand.

(2) Pay franchise fee and royalty for the franchising rights.

From the same definition, we can define a franchisor as someone who is,

A brand owner, granting rights or license to an individual to use its brand name, product and its systems & process in a territory in return of compensation for a fixed term.

Let us understand this with an example:

Brand owner of XYZ brand is Mr. J grants franchising rights to Mr. K for the entire Gotham city for five years against the franchise fees of Rs. 5 lacs and a royalty of 5% of the total monthly sales.

On the other hand, Mr. K ensures that he runs the business

(1) according to laid down standard operating procedures of brand XYZ

(2) According to the terms mentioned in the agreement.

The example mentioned above covers all the basics of the definition given.

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