A franchise is an authorization granted by a government or private company, allowing the owners to operate on behalf of the company. The franchise business has grown because more people are interested in taking these franchises to increase their earnings.
This is the most important metric when evaluating the profitability of a franchise. It is calculated by subtracting all of the operating costs from the revenue generated by the business. This will give you an idea of how much profit the business is making.
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The company has thousands of new members yearly and is projected to double its members in the next few years. It has over 4,000 franchises in around 40 locations, making it one of the most profitable franchise health and fitness business models worldwide.
Taking Planet as a franchise could elevate your business like never before by introducing some of the highest paying revenues you have had in your life. Their unique business model has inspired them to stay afloat for all these years.
Licensing and franchising are two forms of business agreements that typically involve the license of a trademark and the shared use of brand elements, technologies or systems in the operation of a business. License agreements are more limited than franchise agreements and involve the shared - licensed - use of a trademark, technology, or business system between businesses that operate independent of one another and use their own individual and distinct brands. Franchise agreements are broader than license agreements and, in addition to licensing the use of a trademark, regulate and control the entire branding and operations of franchised businesses that operate under a singular brand and using the same systems, supply chain, and operating procedures.
License agreements are similar to franchise agreements in that they both relate to the shared use of business assets and intellectual property rights. License agreements are different from franchise agreements in that license agreements are more limited than franchise agreements and do not provide the licensor with control over how the licensee operates the underlying business. If a license agreement is prepared improperly and includes too much control over the underlying business, the license agreement may give rise to an illegal franchise relationship.
Franchising is a business agreement that includes the license of a trademark, the payment of a fee, and control over how the underlying franchised business is operated. The agreement that creates a franchise relationship is the franchise agreement and the parties to a franchise agreement are the franchisor and the franchisee. The franchisor is the company that owns the trademarks and has created the systems and procedures for developing and operating a franchised business. Under the terms of a franchise agreement, the franchisor grants to the franchisee the legal right and obligation to develop and operate a new franchised business location. The franchisee is required to pay to the franchisor an upfront fee known as an initial franchise fee and on-going fees known as royalties. Unlike a license agreement, franchise agreements are intended to duplicate a brand, its business model, and its on-going operations. Franchise agreements require uniformity and within a franchise agreement, unlike a license agreement, the franchisor is granted extensive control over how the underlying business is operated.
Examples of franchises include restaurants like McDonalds, retailers like GNC, healthcare providers like American Family Care, service providers like RE/MAX, and many other businesses and industries. To learn more about franchising read our Ultimate Guide to Franchising Your Business.
License agreements are limited in scope to a business relationship between two businesses that share a common brand element or technology but, overall, operate independent of one another and without control over how the other operates and conducts its own business. Any control involved in a license relationship is limited to the use of the shared brand element or technology and represents only a small portion of the overall business operations. On the other hand, franchise agreements are much broader and, in addition to a businesses shared use of a brand, technology, and systems, regulates and controls the entire branding and operations of the underlying business.
The difference between licensing and franchising is extremely narrow and is determined by the degree of control created by the underlying agreement. Franchising is used to achieve the multi-unit expansion of a brand through franchised locations that maintain and operate under uniform systems and standards. Licensing is used to monetize trademarks and other intellectual property assets by allowing licensees to use the licensed assets within independently operated businesses. Licensing is not an alternative to franchising and if a license agreement includes the license of a trademark and control over the underlying business operations, it may qualify as a franchise agreement.
The Franchise Disclosure Document (FDD) is a legal document which is presented to prospective buyers of franchises in the pre-sale disclosure process. The FDD spells out the services and responsibilities of the franchisor and as well as information about the franchisor, how long the franchisor has been in business, the competition environment, and any special license or permit requirements.
Franchising is a business that is not appropriate for every company or every concept. When implemented correctly, it can result in great profitability and increased market share. When not implemented well, the franchisees can experience significant losses and hold the franchisor responsible. The following are ways to mitigate franchisor liability:
An Atlanta pharmacist created the refreshing beverage, Coca-Cola, in May of 1886. He stirred up a fragrant, caramel-colored liquid and took it a few doors down the street to Jacobs' Pharmacy. Customers sampled a new beverage, the syrupy mixture combined with carbonated water, and agreed -- this new drink was special. Jacobs' Pharmacy put it on sale for five cents a glass. Soon, other drug stores were profiting from soda fountain sales of Coca-Cola. In 1888, Asa Candler began a process to buy out the inventor and his partners. Candler, a natural born salesman, transformed Coca-Cola from an invention into a business. Candler built syrup plants in Chicago, Dallas and Los Angeles, promoted the product with coupons for complimentary first tastes, and outfitted distributing pharmacies with clocks, calendars and apothecary scales bearing the Coca-Cola brand. Inevitably, the soda's popularity led to a demand for it to be more widely available. In 1899, Candler sold the bottling rights for most of the U.S. to businessmen in Chattanooga, who opened the first plant in that city and another in Atlanta the next year. By 1913, bottlers worked through 2300 wholesalers and 415,000 retailers.
A franchise can be a quick way to go into business. If you are the franchisee, meaning the one who is licensing a franchise and operating it, you have the advantage of instant brand recognition and an established market. As a franchisor, the owner of the franchise, you receive payment for the right to use the franchise name and, potentially, royalties on the profits. 2ff7e9595c
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