A simple form franchise is a legally binding document that states the rights and responsibilities of a franchisor and franchisee. It is a simple form agreement entered by 2 interested parties. It simply states that a franchisee has the mandate to market a product or service using the same model as the franchisor. It also underlines the need to make certain fees to the franchisor for subletting his business model.
Before signing any franchise agreement, it is crucial to solicit information as much as possible about a franchise. The Franchising Code of Conduct ensures that franchisors give out a disclosure document 14 days prior to starting out, renewing or extending a previous agreement. It is important that you understand what you are being offered before putting pen to paper. A franchise agreement only reserves you the right to run a business periodically. It is never a life-time agreement.
The business format franchise is more popular. It is an extensive agreement whereby the franchisor provides adequate information about the franchise, including a comprehensive plan for the running of the franchise business. It is a step-by-step plan that spells out how the franchise works and the aspirations involved in making it a success.
It breaks down what needs to be done and how it can be accomplished. It is also a problem solver for any problems or issues that might be encountered. A business format franchise fosters a relationship between the franchisor and franchisee. It helps to really show the expertise and experience of the franchisor making it attractive and understandable for the franchisor.
Business format franchises are the best ones to go for because you know what to expect. They put a franchisee fully in the loop about the whole gamut of services, trainings, product supplies, marketing plans and business financing. It also includes the key elements of a business franchise like operating manuals, marketing strategies and financial goals. The overall thrust of a business format franchise is to allow the franchisee understand and buy into the concept.
A franchisee pays an initial one time franchise fee and ongoing franchise fee called royalty, which makes way for training, research and development and consistent support. UPS, the popular courier company, is a great example of business format franchising. In this case, the franchisee buys intellectual properties for the business as well as the product. It is always best to opt for the business format franchise.
Simple Form Franchise vs. Business Format Franchise