Business franchising is the most popular way of entrepreneurial relations. The main idea of this is to sell license to companies or individuals by franchisor. On this basis the franchisee is entitled to open stores (Chain Stores) in order to sell products and services to consumers under the franchisor’s brand.
That is there are franchising relationships for this type of activity. A small company in this case joins the complete circle of the large-scale enterprise. At the same time the franchisor demands that the franchisee should meet certain requirements, concerning technology and quality. Besides the franchisor trains the staff, chooses the spot for the future enterprise and provides other services concerning methods of supply, reports and other industrial points.
In business franchising, the franchisee pays fixed fees, and in case of need he enlarges the advertising fund run by the franchisor who is also authorized to lease basic funds, offer financing and act as the main supplier for his protege.
Depending on the type of initial franchise fund, this business-model is classified into the following most common sub-groups:
- Working-franchise. In this case optimal prepared job opportunity is created by franchisors. Counter-van is purchased and equipped most of all by them.
- Commercial- franchise. It requires more significant investments from franchisor. It is necessary to acquire production facilities, to find working sites, as well as to take care of an additional hired staff.
- Investment- franchise. Its main purpose is to return initial investments. The most known company which has accepted business franchising and is widely extending is “McDonald’s Corporation”.