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Franchise is a method of doing business by licensing trademarks. A recurring royalty fee being the prime source of income, the advent of franchise business dates back to the 1850s. Franchises are sold by franchisors and bought by interested franchisees. However, franchising has evolved when it was realized that a franchise would benefit more if changes are initiated that would focus on the quality of the franchisees selected rather than focusing solely on the franchisees’ bankroll.

Franchised businesses offer unique challenges to the successful launch and operation of a loyalty program. While the concept of a broad coordinated marketing campaign fits well within the franchise concept, funding issues relating specifically to loyalty programs in the franchised environment can become a challenge and barrier to their successful implementation. Franchisees are tenants of Tim Hortons, which selects and purchases sites for stores and builds the restaurants. In addition to rent, franchisees are required to pay to the mother ship a 3% royalty and a 4% advertising fee based on gross sales. Franchisees who require funding (and most of them do) will need to enter into one or more funding agreements, most often with a commercial bank. On occasion, private funding in several forms can be accessed or partnership arrangements may come into play.

Franchise fees can be amortized over the life of the franchise agreement. Franchisees also need to have a certain amount of commitment to quality in terms of materials purchasing and hospital supplies. They have the option to plug in to our group purchasing system though it is not a compulsion. Franchisers won’t be successful if their concept has little appeal outside its original market. In order to be introduced successfully around the nation, a concept must be market-tested and appeal to a broad spectrum of consumers.

Franchise arrangements are subject to an array of laws and regulations in addition to those regulating commercial contracts and intellectual property rights. There are no specific laws governing franchising in India.

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Tags: Advertising, fees, Franchise, royalty

This entry was posted on Monday, July 28th, 2008 at 12:43 am and is filed under Advertising, Business, Companies, Franchise. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.