The Body Shop

A franchise is a legal agreement between franchisers and franchisees that consents use of the franchise’s trademark and trade name or marketing plan

1. Franchisees gain numerous advantage when they purchase a franchise. First, while a franchisee may be opening a new store, it is part of an already established business and system. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. Franchisees also get support for management and training activities, as well as financial assistance. Going hand in hand with this, a franchise already has an established brand name, quality of goods and service which have been standardized across the franchisor’s larger company, and national advertising programs from franchisors. Franchises also have large-volume, centralized buying power. A franchise has proven products, and

While doing some research I found that a franchise agreement is a binding legal contract that is signed between a franchisor and franchisee. A franchisor is the company owning the rights to grant franchises to franchisees, while a franchisee is a person or entity who is given the right to conduct business by a franchisor or licensor. The most important definition however is that of a franchise which is an authorization granted by the government or company to an individual or group allowing them to carry out certain commercial activities.

To ride on the coattails of a larger chains advertising wings and not have the ability to compete with them only makes the Peaceful Rest look weaker and less appealing. Consumers depend on the strength and dependability of a chain to meet their needs. (Kayaman & Arasli, 2007). The decisions that Tristan is left with is choosing a franchise company.

The franchiser can attain rapid growth for the chain by sign- ing up many franchisees in many different locations.

And franchisors, by design, exert indirect control over their franchisees and franchisee’s employees by way of licensing out the operation of their brand. In traditional franchise agreements, the franchisee is an independent business owner with a license to use the franchisor’s trademarks and other intellectual property as part of a royalty or fee arrangement. The ruling, which states that “setting productivity standards” is a form of indirect control, understandably has franchisors and franchise attorneys seeking shelter.

You pay a franchise fee and you get a format or system developed by the company (franchisor), the right to use the franchisor’s name for a limited time, and assistance. For example, the franchisor may provide you with help in finding a location for your outlet; initial training and an operating manual; and advice on management, marketing, or personnel. The franchisor may provide support through periodic newsletters, a toll-free telephone number, a website, or scheduled workshops or seminars.

Roman Holiday defined reacquired franchise rights as “the excess of the net amount assigned to identifiable assets and liabilities recorded upon the acquisition of franchise markets.” It was classified as an intangible asset with an indefinite life. The reacquired franchise rights takes over 29% of Roman Holiday’s total asset and the complicities in the classifications introduce significant risks of material misstatement in the company’s financial statements. The classification should be critically assessed in order to ensure the fair presentation of the company’s financial statement.

Franchising is a business model that allows companies to rapidly expand their market share. According to Franchise.com (2015), there are three types of franchises: distributorships, trademark licensing, and business format franchises. When two organizations enter into a distributorship, the originating company provides the rights another company to sell their products. An example of a distributorship is when an auto manufacturing company grants rights to a dealership to sell their vehicles (Franchise.com, 2015). Trademark licensing is when one company allows another company to use their trademark (Franchise.com, 2015). The business format franchise authorizes franchisees to sell the parent company’s products and/or services as well as utilize their business model. This type of franchising is the most common and is the type needed to obtain to open a new Cold Stone Creamery.

To qualify to own Wendy’s Restaurant, the franchisees must have an interest in pursuing multi-unit opportunities through the acquisition of existing or development new restaurant, have experiences in restaurant industry to provide leadership skills, and willing to learn and practice Wendy’s standards in order to operate the franchise. Once the franchisees meet the requirements, they must have cover the fees for the costs, which it is:

You could contractually require them to personally participate in the business, and restrict them to one property until they’ve proven themselves.” He then described typical terms in the franchise restaurant agreement: a 20 – year term with renewal at the franchisor’s option; a 5% to 6% royalty on gross revenues, and an up-front fee. “That fee depends on the strength of the brand,” he noted. “And you can structure the deal so that each franchisee is responsible for his own financing.” He explained that some franchisors handled all development, including market analysis, feasibility studies, site selection, and construction themselves, then lease the property to the operator. “But in others,” he continued, “franchisees must buy or lease the land in an attractive location, and build the restaurant themselves. Since Porcini’s doesn’t have a construction department, which might be the way you should begin.”

As part of our evaluation of your application, please carefully answer the following ten questions. If you have partners that will be on the franchise agreement, please have them answer these questions too. All answers and information you provide will be held in strict confidence.

Franchisors are increasingly having to be more and more selective in the adoption of franchisees with factors such as economic climate and the potential difficulty with growth playing key factors in the decision making process. It is not simply an ability to grow which creates a successful Franchise and nor is it the desire of any franchisor to adopt every potential franchisee. Franchisors are becoming more and more scrutinising as the global economy declines. There is a general understanding within any franchised

McDonald’s has extremely strict rules when it comes to awarding franchises. First, it is very costly to open a new location or purchase an existing location, with the median startup cost being $300,000 (Kalnins & Lafontaine, 2004, p. 750). As well, the company does an extensive background check on a variety of issues including credit history, business management experience, and the acceptance of the contractual agreement that the company provides. Because of these strict rules and the large amount of capital needed to purchase a location, “rates for franchise applicants are 1% for McDonald's” (Norton, 1988, p. 204). This is an extremely low acceptance rate and is even lower than McDonald’s chief competitor, Burger King, who accepts 1.5% percent of applicants (Norton, 1988, p. 199). These low numbers are understandable in the context of the business and risk that is involved. Though the franchise purchaser must pay a large amount of money to gain the rights to the restaurant, they truly have nothing to lose besides money because they are simply running another company’s business model as well as using their trademarks and logos. McDonald’s on the other hand, has a great amount at stake because they place the well being of an entire restaurant into the caretaking of an individual who simply purchased the rights for the store. If the store does poorly or if there are issues with customer service, it reflects

♦ Reliance on franchising "associate" stores and opening a few new company-owned stores as a means of expanding nationally and internationally. However, franchise licenses were granted only to candidates who have experience in multi-unit food establishments and who possess adequate capital to finance the opening of new stores in their assigned territory.