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Franchising

Franchising

Franchising is a certain type of relationship between entities when one side (Franchisor) transfers to the other side (Franchisee) the right to a certain type of business using its own trademark for a fee. The use of the franchise is regulated by an agreement between the Franchisor and the Franchisee.

The best known examples of franchise applications include McDonald's, Burger King and KFC. After signing a contract to purchase a franchise and registering it with Rospatent (Federal Service for Intellectual Property) the Franchisee gets the right to use the trademark and business model of the Franchisor.

Franchising has its advantages and disadvantages.

The main advantages include:

  • integration into a large company, which may be the key to successful negotiations with banks when obtaining a loan for business development since franchising can help reduce business risks;

  • integration into the existing marketing and advertising system, which require a lot of money and time;

  • quick access to markets;

  • obtaining company support in choosing a site for providing services;

  • use of a well-known and verified trademark and range of services;

  • ability to timely obtain up-to-date knowledge through the organization of regular professional training.

The main disadvantages include:

  • dependence on a large company;

  • difficulties in choosing the right franchisor;

  • the inability of influencing the Franchisor’s trade policy (the Franchisee is forced to abide the rules and restrictions in business established by the Franchisor, even if they do not bring benefits to the business);

  • quite often strict rules are set for the Franchisee when exiting a business and a ban on opening competing organizations for a certain period of time and in a certain territory is stipulated;

  • the inability to influence the marketing or advertising of the Franchisor (the Franchisee is forced to take part in the payment of centralized marketing and advertising campaigns).

In order to prevent errors, the execution of the contract and registration of the franchise in Rospatent require the involvement of specialists. Specialists at Erfis can provide professional assistance in the preparation of documents required for mutually beneficial cooperation on the basis of franchising.

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