Franchising involves a long-term cooperation model based on an agreement between two enterprises. The operating model is based on the business idea developed by the franchisor, which has been tried and tested, found successful and profitable and then modelled as a concept.
For the contract period, the franchiser assigns the right to utilise a concept in return for compensation. In other words, the franchiser assigns the related know-how, trademarks and advantages of cooperation to the entrepreneur or entrepreneurs. This forms a cooperation network, called the franchising chain. Members of the chain share a common operating model, brand and uniform look. For instance, marketing material, such as advertising in the press, may be nationwide.
Usually, the franchiser does not finance the franchisee or own a share in his/her company. The franchiser transfers the know-how related to the concept and its use to the franchisee through training and manuals, among other methods. The franchisee commits to compliance with these instructions, outlines and quality standards in business. The franchiser manages the cooperation chain.
When you start the franchise, the franchiser provides you training and assistance in launching the business, such as finding premises and equipping them, and in financing negotiations, concluding supply contracts and arranging the opening of the business. The franchiser supports chain members on a continuous basis, for instance through monitoring and planning systems, by providing advice and facilitating internal networking.
For you as the entrepreneur, the operation is against payment: you pay a price for the right to use the concept, for membership in the chain, and for benefits and services received, either as a one-time fee or in the form of continuous payments.