The franchise package is the main advantage of the franchise system because it contains a blueprint of the complete business concept offered by the franchisor. As a franchisee, you will benefit greatly from this assistance provided by the franchisor. Also, you need to understand how this business concept works and how to use its full potential.
If you are unfamiliar with franchising and its package, this article will give you an insight into how this works in practice. Franchising is one of the most popular ways of doing business because it does not require excessive managerial knowledge and experience for success. This type of business has less risk, which makes it very popular among entrepreneurs.
If you are thinking of investing money in starting a franchise, you need to learn more about the franchise package. Now we will explain to you what it is and what it contains.
What is Franchise Package
The franchise package is a schematic plan according to which a business is run. Its goal is to direct a person who has no previous experience in running this type of business on the path of sustainable business. Most often, all this knowledge is gathered in one place in a document called the operation manual. This document is vital because it contains an insight into the processes that the new franchisee will apply in practice.
Most franchisors make great efforts to put together a franchise package that will be easy to understand and even easier to implement. Thanks to the knowledge and assistance that franchisors provide to their recipients, a large percentage of franchises have been operating successfully for many years.
It is in the franchisor’s interest that every franchisee succeeds – the franchise system makes a profit from the royalty fees that each facility pays every month. This is the primary source of income, and because of that fact franchisor will do all that is in its power to help the franchisee.
The initial fee, which averages between $ 10,000 and $ 30,000, is paid for the knowledge that will be transferred to the franchisee – the initial fee is higher for global franchise systems such as McDonald’s, Subway, etc. By signing the franchise agreement, the package recipient gets the right to use the brand’s Trademark and apply the knowledge (know-how) of the franchisor.
To get the opportunity to use the knowledge package that the franchisor will pass on you, the first thing you need to do is sign a franchise agreement. This contract contains the obligations you have (fees) and that the franchisor has towards you. When this document is closed, the franchisor has obligate to help recipients and to transfer to the franchisee all the necessary knowledge.
What the franchise package contains varies from system to system. It is up to the franchisee to decide which franchisor suits him best- we have hundreds of franchises available in the market in various niches of business.
Suppose you are planning to enter the business venture of starting a franchise. In that case, it is imperative that you hire a lawyer – a good franchise lawyer will give you helpful information regarding this business collaboration. Also, do not rush when choosing a franchisor; weigh all the advantages and disadvantages of this type of business before you decide to sign a franchise agreement.
What Does a Franchise Package Include
Our focus will now be on explaining in more detail what the franchise package contains, that is, what benefits you can expect from it. To make it easier for you to explain what it is all about, we will mention only the three most important features that will benefit a potential franchisee.
The franchise package contains:
- Right to use Trademark
- Knowledge transfer by the franchisor
- Insight in the franchise operations manual
1. The right to use the franchise trademark
Suppose you are familiar with the term trademark. In that case, you know that by registering a trademark, a company gets the right to protect the name, logo, tagline, or any other visual signs – no one has the right to use a trademark without the consent of its owner. Franchisors have protected their Trademark, and now no one can use their “identity” without bearing the legal consequences.
This is important because the franchisee, with the signing of the franchise agreement, in package gets the right to use every Trademark of that particular franchisor legally. This increases the chances of business success and reduces marketing costs to a minimum.
Trademark protection is an effective market tool by which manufacturers and service providers protect the funds they have invested in promoting and marketing their products or services. This is important because, as you know, marketing is the most important aspect of any business.
The use of a trademark is most apparent when the mark is placed on goods with the ® symbol. Franchising is such a business concept in which you, as the franchise recipient, get the opportunity to use all the benefits that go along with the well-known brand with a large base of service users.
You may not be familiar with this, but there are a significant number of so-called “fake franchises” on the market, and this practice is most common in China. In this way, many companies present themselves as something they are not. However, if you do this in the US or any other developed country, you would have big problems with the law.
Trademark is protected by states law, and any company or person who violates it risks prosecution and payment of hefty fines.
Therefore, if you want to use the benefits provided by the franchise package, you will have to sign a contract with your desired franchisor. In this way, you will comply with the law, and you will have the opportunity to develop your business legally and safely.
2. Knowledge transfer by franchisors
The franchise package also includes the transfer of so-called know-how; this is the best benefit of the franchise partnership. Franchisor know-how is professional knowledge and experience about a particular product’s technology, production process, and how to run a business.
Access to the franchisor’s knowledge base is essential because these kinds of business systems make fewer mistakes than stand-alone businesses – a long-standing company in which many business tactics have been tested has resulted that the most mistakes are already made. Franchise systems rarely make the same mistake twice, which is why companies like this are perfect business partners.
In practice, the know-how offers the possibility of applying the various knowledge and business experiences that the franchisor has accumulated over the years. This knowledge is divided into two categories, commercial and technical. Commercial know-how is related to business methods (organizing sales, providing services, etc.), and technological know-how provides insight into production methods (recipes, regulations, plans, specifications, etc.).
It is not said in vain that knowledge is power, and because of the transfer of knowledge within a franchise package, this type of business has a lower failure rate than ventures started in a stand-alone arrangement. In this system, the franchisee receives accurate business-related guidelines – these guidelines must be strictly enforced because otherwise, the franchise agreement can be nullified.
Franchise contracts are pretty inflexible, so if you are not willing to fulfill all the parameters from this contract, then this is not the type of business for you.
When choosing what kind of business to start, keep in mind that the statistics are on the side of the franchise business. You have probably noticed for yourself that most franchise companies are organized and operate at a desirable level. This fact is fundamental nowadays because the economic crisis happens every few years. So it is good to have a strong partner who will help with the issues that every entrepreneur who competes in the free market has.
The business that is started in the franchise system very rarely fails, and when that happens, it is most often because the recipient did not follow the procedure. The provider has already gone through the learning process and gained experience by the method of trial and error.
With the franchise package, all the provider’s knowledge is transferred to the recipient – this is the main reason why more and more entrepreneurs choose franchises over independent startups.
3. Insight in the franchise operations manual
When people talk about a franchise package, they think that knowledge transfer and the operations manual are the same things. Therefore, we will explain in more detail some of the items that are regulated by this document.
The franchise operation manual includes:
- A description of the franchisor’s system and business philosophy
- A list of rules by which a particular franchise system operates
- List of equipment required to run a franchise
- Description of organizational structure (working hours, pricing, safety at work, employee training, etc.)
- Forms of various contracts ( service contracts, employment contracts, etc.)
- Contacts directory – phone numbers of people who help the franchisee
We have underlined only the most important features that the operating manual includes; as you can see for yourself, this is a guide that every franchisee must follow if he wants to achieve adequate success.
The franchise package is also important because it provides better contract conditions with suppliers. The franchisor negotiates contractual terms with suppliers for the entire franchise network—for example, the supply of Coca-Cola in each restaurant. The franchisor can get better terms of purchase, and that can benefit every branch of the franchise.
The franchisor will provide the needed training and operations manual, but every franchisee makes decisions about their businesses, and the recipient will decide what and how much he will do. If you are a franchisee and do not follow the business model advised by the franchisor, you must be prepared that such behavior may lead to the failure of your business and the loss of the investment.
Suppose you decide to follow a successful business system and use the franchisor’s support; the chances of success and a quick return on investment increase drastically. Also, don’t underestimate the franchise package because that knowledge can be helpful for every franchise branch.
Now that it is clear what a franchise package is, we now know the benefits of it. In most cases, the franchisee does not have too much experience and knowledge about business and how it works. So the recipient must receive training about business development from the franchisor and constant support.
The franchise package includes an operational manual that explains how to keep the franchise successful. In addition, the franchisor typically collects as much information as possible about the market and business environment, which it then shares with its partners. So this type of business is a symbiosis in which the two parties work together to achieve the same business goals.
Whether you will be successful in this type of business depends on you and your willingness to obey the franchise agreement. Applying the franchising business systems in the right way increases the chances of success many times over.