Franchising is a form of cooperation between two businesses by which one, the franchisor, grants the other, the franchisee, the right to use a business idea and operating model it has developed and tested, against the payment of a fee. The franchisee can use the franchisor's know-how and trademarks and gain benefits from chain purchases and common marketing. Such a cooperation network is called a franchising chain.
Franchising chains operating in Finland include, among others, R-kioski, Kotipizza and Café Picnic. There are about 200 franchising chains in Finland. Most of these operate in the service industries and retail trade.
Characteristics of franchising chains include:
• Franchising refers to long-term contractual cooperation between two independent enterprises, the franchisor and the franchisee. The franchisor does not normally finance the franchisee or own any shares in it. However, the franchisor usually operates some outlets of its own in the chain.
• The cooperation is based on a concept developed by the franchisor and licensed to the franchisee; all members of the chain operate in the market in accordance with the same concept. The members of the chain also operate under a common brand and with a uniform appearance.
• The franchisor transfers the concept and the related know-how to the franchisee by means of training and manuals. The manuals document all the most essential issues and instructions that the entrepreneur must know in his or her operations. The franchisee commits to compliance with these instructions and guidelines in its business and undertakes to fulfil the quality requirements of the concept. The franchisor provides and arranges continuous commercial and technical support for the franchisees in the chain. When the entrepreneur starts his or her business, the franchisee provides him or her with training and assistance in issues related to starting the business, such as acquiring and equipping the premises, purchasing agreements, arranging an opening celebration, etc. The franchisee continuously develops the competitive ability and operations of the chain members through marketing actions, training, monitoring and planning systems, advice, internal communication of information and exchange of experiences.
• The operations are fee-based for the entrepreneur - he or she pays the franchisor one-time and/or recurring fees for the right to use the concept, membership of the chain and the benefits and services received (recurring fees include cooperation and/or marketing fees, generally 0–10 % of net sales).
• The franchisor manages the cooperation chain and controls the operations of the franchisee. The rights and obligations of the parties, and the rules of cooperation, as well as termination of the cooperation and its consequences, are always specified in a written agreement. |
More information is available on the website of the Finnish Franchising Association.
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