Growing your business through franchising - Ulster Bank

“What is franchising”
Franchising is, in effect, a system for marketing goods or services. You, the franchisor grant’s a licence to
franchisees to operate a business under their name and system to market your products and/or services for a
specified period. The franchise agreement is usually subject to renewal so long as the terms have not been
defaulted by the franchisee.
You will receive an initial fee for training the franchisee and assist with the launch of their business. In return you
get to share in their success. A return on investment is normally obtained through receiving a management
services fee by way of a percentage of the franchisee’s turnover, or through a mark-up on the goods they supply.
This close inter-dependence is unique to franchising. It’s a major factor, in making the system different from other
business opportunities, such as agencies and distributorships. That is not to say that there is anything wrong with
other systems. In fact, one of the first questions you will need to determine is which type of business arrangement
would be the most appropriate for your particular company’s expansion. Potential franchisees will be more
interested in the more popular franchises that have a visible presence in the marketplace.
Franchising “terminology” explained
Franchisor
You. The franchisor is the developer (person/company) of a product or services, who offers investors the right to
trade under the franchisor’s business name. The franchisor also provides support in setting up the franchise and
in its ongoing operations.
Franchisee
A franchise is a business arrangement where the owner of a product, a service or even a recognised trade name
agrees, for a fee, to allow a person/company to trade using the same product service or trade name, and passes
the benefit of it’s know-how to that person/company.
Business Concept
Your tried and tested method and systems of operating your business. Since, it is this experience that interested
the franchisee in the first place and makes your current business a viable franchising model. It sets the standard
to which all subsequent outlets should operate.
A Franchisee
The term given to a business arrangement where you (as owner of a product/service or brand) agree to a third
person/company to trade using the same product/service or brand. A usage fee is agreed between you both and in
addition you pass on your business acumen to the new start up team.
Franchising agreement
Typically it will cover:
■ The conditions of franchise
■ The obligations of both parties
■ The duration of the agreement
■ The territory in which the franchisee will operate
■ The payment or fees arrangement
■ Termination conditions
■ Renewal entitlements
■ Disposal provisions
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