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A Good Explanation of Franchising When a business gives permission to another business to operate in its products is what we call franchising. Leasing or renting for a business opportunity is what entails franchising. The original company that gives the right to another business to deal in products similar to its products is called a franchisor while the business that request for permission to deal in the original companies products is called a franchise. The right to deal in products of the original company is not free of charge. There are financial commitments that the franchisee must fulfill to be given the green light to operate. Trademark’s royalty, the cost of training and advisory services and a percentage of each unit sold are the three financial commitments that the franchisee must meet to be allowed to operate by the franchisor. When the franchise succeeds the franchisor also succeeds. The franchise only last for a particular period. It is possible to renew the franchise agreement. The agreed location is where the franchise is supposed to operate. The role of protecting the trademark belongs to the franchisor while the obligation of carrying out the services that the trademark entails belongs to the franchise.
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Franchisees could exist as single or multi-franchisee. Single franchisee operates only one unit while a multi-franchisee operates more than one unit.
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The number of units to the franchise, the time frame for each unit and the area for each unit to operate from must be agreed. Each unit of franchise has a unique agreement. Multi-franchises are in high number nowadays due to their popularity. Multi-franchise has had much influence over the many years they have been in existence. To set up multi-franchises high levels of investments are required. High level of stability is provided by the multi-franchises. Since the multi-franchises operate in diverse locations their level of success is very high. Single franchises may not be as successful as the multi-franchises. A single franchise might be disadvantaged since it operates from one location. The reason why multi-franchises have enjoyed exponential growth is that of popularity growth. With the success of multi-franchises the franchisors might want to cash in on that huge success by encouraging the multi-franchises to open more units. The other units of a multi-franchise might come into action to help a unit that might be lagging behind regarding performance. The viability of multi-franchises relies on good research. For the multi-franchise to thrive it is advisable to have ready cash and other forms of investments.