What is a franchise?

A franchise refers to an individual or enterprise that owns a business system of unique products, equipment, trade patents or service marks (i.e. franchise person) in granting other individuals or enterprises (called licensees) the right to conduct business activities in the same industry in a specific area and period in a pre-specified manner.

Franchise rights generally include three different forms: trademark franchise rights, product franchise rights, and operating model franchise rights. What is a gas station franchise?

Gas station franchise means that the franchisor has the right to license others to use the trade names, registered trademarks, proprietary technologies, and business models related to the gas station operation by signing a contract. , operating technology, service standards, etc. are granted to other gas stations for use. The authorized gas stations engage in refined oil retail operations and related services under the unified franchise system in accordance with the contract, and pay corresponding fees to the authorized enterprises. Among them, the enterprise that grants franchise rights to others is the franchisor, and the gas station that is granted the franchise rights is called the franchisee.

The franchisee must meet the following conditions:

(1) The gas station complies with the local gas station development plan and meets national environmental protection, fire protection, and building safety standards;

(2) Have certain business management capabilities, good credit status, and no illegal business records in the past two years;

(3) Other conditions stipulated by the National Economic and Trade Commission and provincial economic and trade departments. What is an online franchise?

What is a franchise?

Franchising means that the franchisor grants its own trademarks (including service marks), trade names, products, patents and proprietary technologies, business models, etc. to the franchisee in the form of a contract, and the franchisee The franchisor shall engage in business activities under the franchisor's unified business model in accordance with the provisions of the contract and pay corresponding fees to the franchisee. From the above definitions, we can see that franchising has the following basic characteristics:

1. Franchising is a contractual relationship between the franchisor and the franchisee, that is, the franchisor and the franchisee The relationship between the franchisee and the franchisee exists and is maintained depending on the contract between the two parties;

2. In franchising, there is no tangible asset relationship between the franchisor and the franchisee, but they are independent legal entities. Each independently assumes external legal responsibilities;

3. The franchisor has ownership and/or exclusive rights to the authorized matters involved in the contract between the two parties, and the licensee obtains the right to use (or the right to exploit) through the contract and The right to income based on the right to use;

4. Authorization in franchising refers to the right to use (or utilize) intangible assets including intellectual property rights, rather than tangible assets or their right to use;

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5. The franchisee has the obligation to pay fees to the franchisor according to the contract between the two parties;

6. The franchisee should maintain the uniformity required by the franchisor in the contract.

The main advantages of the franchise model are:

The franchisor can achieve the purpose of scale economy by investing only in brand, operation and management experience, and not only can get returns in the short term, And the intangible assets rose rapidly.

Since the licensee is purchasing a successful operating system, it can save the "learning curve" that self-starters have to go through, including the necessary exploration process such as selecting profit points and opening markets, reducing the cost business risks.

Franchisees can own their own companies and control their own income and expenses. The franchisee's business start-up costs are lower than other business methods, so the investment can be recovered and profitable within a shorter period of time. Franchisees can get help and support from experienced franchisors in terms of site selection, design, staff training, marketing, etc., so that their operations can quickly move into a virtuous cycle.

There is no competitive relationship between the franchisor and the licensee, which is conducive to both parties expanding their market share.

In summary, we clearly understand that the essence of the franchise business model is an effective method and approach for enterprises to use intangible assets for capital operations and achieve low-risk capital expansion and scale operations. This is also the fundamental reason why franchising can develop rapidly.

A century-old review of franchising

In 1865, the American Singer Sewing Machine Company pioneered the franchise distribution network and has dominated the U.S. market ever since.

In the 1950s, McDonald's and KFC introduced the franchise system, and the company developed rapidly while improving the franchise format.

In the 1960s and 1970s, franchising broke through the barriers of trade protectionism with its unique vitality and spread from the United States to all over the world. In 1963, Japan established its first franchise chain store, the "Fujia" Western-style pastry and coffee shop, and began to abandon the traditional direct-operated chain operation format. After the 1970s, Japanese franchises developed rapidly, focusing on the retail and catering industries, and formed their own franchise system.

Since the 1980s, global franchising has developed rapidly... United States: A chain store opens almost every 6.5 minutes. Malaysia... Singapore... Franchising has become a national policy in these countries.

What benefits can franchising bring to you?

1. Fulfill your dream of successfully establishing an independent business.

2. Share brand gold mine: Brand is a symbol of honor, quality and service, with extremely high gold content; consumers’ recognition of the brand greatly shortens the investment period of chain operators.

3. Share business know-how: "Borrow others' ladders to climb the building of your own success." Using the experience and information of the headquarters can avoid various risks that cause 80% of first-time entrepreneurs to ultimately fail.

4. Share the support provided by the headquarters: training, management, advertising, promotion, etc., easily open a store and make huge profits.

Franchising in China

Franchising entered China less than 10 years ago, and it only took the past two years for franchising to really develop. As large international companies break into the Chinese market, this business method has violently impacted the traditional circulation system. Franchising has become very popular in China. Franchising has spread across almost all industries in the tertiary industry, especially in the service industry. Franchising is quickly becoming the most profitable investment method and entrepreneurial approach in China. The time is ripe for the development of franchising in China. China is the largest and most potential franchising market in the world. What is franchise transfer?

Franchise transfer can be divided into 3 types, with the following meanings:

1. The production franchisee invests in building a factory, or through OEM In this way, the franchisor's trademark or logo, patent, technology, design and production standards are used to process or manufacture the franchised products, and then sold through dealers or retailers. The licensee does not deal directly with the end user (consumer) . Typical cases include: Coca-Cola's bottling plant and the production of Olympic Games logo products.

2. Product-trademark The franchisee uses the franchisor's trademark and retail method to wholesale and retail the franchisor's products. As a franchisee, the franchisee still maintains the trade name of its original enterprise and sells products produced by the franchisor and for which the trademark is owned, either solely or in conjunction with other products.

3. Business model: The franchisee has the right to use the franchisor’s trademark, trade name, corporate logo and advertising, and operate it in full accordance with the single store business model designed by the franchisor; the franchisee is known among the public It appears completely as the franchisor's enterprise; the franchisor implements unified management of the franchisee's internal operation management, marketing and other aspects, and has strong control. How to obtain a franchise

Introduction: Investing in the franchise industry requires the franchisee to have a keen insight into business. Before purchasing a franchise, the franchisee should have an understanding of the benefits and dangers of franchising, must be comfortable with the resources provided by the franchisor, and understand that purchasing a franchise is risky even with many precautions taken. When evaluating a franchise opportunity, on the one hand, usual business knowledge is still important, but on the other hand, investors need to understand how franchising is different. 1. Development Schedule When a franchisee obtains a franchise for a specific area - often called a regional franchise or master franchise - the franchisor will usually insist that the franchisee fulfill a mutually agreed-upon regional development schedule. This means that the franchisee must develop an agreed number of franchised stores within a certain number of years. 2. Fixed Franchise Terms Almost all franchise agreements have a fixed term. Unless the franchisee is seriously unable to meet its obligations, most franchisors will extend the term when it comes.

3. Sub-franchise rights The right to obtain a regional franchise or a general franchise does not mean that it has the right to sub-franchise. This means that a franchisee without a sub-franchise can only operate all of its stores directly at its location. It is imperative that prospective grantees consider the above and make requests early in negotiations. Many of the current misunderstandings and conflicts in franchising often stem from a lack of understanding by franchisees of "Western-style" franchising. Although franchising has a high success rate, it's not right for everyone. Now let’s talk specifically about how investors should choose a franchise business. 4. Select a Franchise Company When selecting a franchise company you should review the franchisor's documentation stating the company's franchise sales and history. If there are certain situations in the document that lack detailed explanations, they should be requested from the franchisor. Prospective franchisees should understand all relevant circumstances before deciding whether to join a franchise system. 5. Intellectual Property One of the main terms of a franchise is the use of intellectual property. Most franchisors have very specific and specific requirements for how their intellectual property is used. This includes the need for the franchisee to adopt the franchisor's corporate identity in its operations, and sometimes the franchisee may have to purchase items and equipment from overseas in order to achieve uniform standards. What aspects should be paid attention to specifically? 1. The real investment cost needs to be determined as real rather than expected investment. Cost items such as rent, deposits, transportation, wages and insurance need to be carefully checked, especially when the franchisee is unfamiliar with the business. 2. Obligations of the licensee Another area that may cause controversy is the obligations of the licensee. Some franchisors impose so many obligations on the franchisee that it would be better for the franchisee to operate alone. The franchisee's obligations are usually contained in the franchise agreement and are therefore legally binding. These obligations must be understood and agreed to by the grantee. 3. Business records of directors and key managers. These records can answer some important questions, such as: Is the founder still running the company? Is the CEO (chief executive officer) the main shareholder? How long have the directors and key managers joined the company? They Have you ever been involved in a franchise that has failed? Who are the people in the company who really have the “expertise”? It is necessary for additional potential franchisees to meet with people from the franchise company. Regardless, there must be a high degree of rapport and trust between the potential franchisee and the franchisor. 4. Franchisor's history The franchise company must not only show that its business projects are very good, but also that it is a good franchisor. The basic information and statistics that the franchisor should provide include: the length of the company's franchise period, the number and locations of company-operated stores, the number of franchisees and locations, the number of foreign franchisees and locations, the number of stores that have closed or changed hands, the franchise network. Franchisors with a good track record of growth will generally be willing for potential franchisees to meet with existing franchisees and learn about the situation. Existing franchisees are largely a barometer of the franchise network, and prospective franchisees should not miss any opportunity to meet with existing franchisees. 5. The level of training and support provided by the franchisor This is probably the most contentious area of ??the franchise relationship. If what the franchisor does does not match what is promised, it is easy for the franchisee to misunderstand the level of training and support the franchisor is expected to provide. Unfortunately, many franchisors overpromise and fail to deliver. Therefore, all promises made by the franchisor should be in writing. Franchisees must have a clear understanding of the level of training and support that a franchisor is actually likely to provide, as these franchisors are often thousands of miles away. 6. Elements of a good business: These elements should include some of the following: An established name or trademark A good business idea A good business image A proven product or service An excellent operating system A very effective marketing plan Unique technology The above elements It helps the franchisee evaluate the competitiveness of the franchise system he wants to join in a specific area. In addition, it is absolutely necessary to visit the franchisor's offices and several franchise stores. Obviously, investors should seek help and seek advice from as many sources as possible before committing to a franchise. Help and Advice If a franchisee needs help and advice, who should he seek advice from who has a close stake in the success or failure of the franchise business? 1. Trusted Franchise Consultants Before consulting a consultant, he should check their history and learn from those who have received their services. A good consultant should maintain constant contact with the franchisor, franchisees, and others in the franchise industry. Their experience and information are extremely helpful in bridging the gaps in expectations, language and culture between franchisors and franchisees who are far apart.

2. An experienced franchise attorney should obtain advice regarding the legal aspects of the franchise agreement from a reputable franchise attorney. Investing in the franchise industry requires franchisees to have a keen eye for business. Before purchasing a franchise, the franchisee should have an understanding of the benefits and dangers of franchising, must be comfortable with the resources provided by the franchisor, and understand that purchasing a franchise is risky even with many precautions taken. Not all franchises are created equal, and franchise contracts vary. Operations that appear certain to be successful may fail due to declining demand, economic downturn, or poor management by the franchisor. Looking at the numerous franchise systems and distinguishing the good from the bad is a difficult job in itself. The best tools for finding a successful franchise system or avoiding a poorly run one are research and learning. 3. Franchise association licensees can get good advice and information from them at any time. If there is no such association in the franchisee's location, check the franchise association in the location of the prospective franchisor. Most good and established franchisors are members of their home country's franchise association.

If the franchise right is transferred without the consent of the franchisor, is the income from the franchise valid?

The franchisor does not allow the franchisee to transfer the franchise store without authorization. The franchisor should clarify the contract transfer conditions during the contract period, and franchise applicants should be fully mentally prepared to fully consider the difficulty of exiting the franchise system when deciding whether to join the franchise system. The franchise contract stipulates that without the written consent of the franchise headquarters, Party B (the franchisee) shall not transfer the franchise store to others without authorization. Otherwise, Party A (franchisor) has the right to terminate this contract and hold Party B liable for breach of contract. Franchise Right Value Assessment

Franchise rights, as a special type of identifiable intangible assets, play a decisive role in the production and operation of many enterprises. The development of the market economy and the increasingly frequent foreign exchanges have given domestic enterprises more and more opportunities to contact, understand and develop and utilize franchise rights. From the perspective of asset management and capital management, the domestic business community's understanding and use of this type of intangible assets is still in its infancy, especially the understanding and grasp of its asset value has not yet reached a unified and standardized conclusion. In order to facilitate the further development and use of various franchise rights to serve enterprise production and operation, it is necessary to systematically explore the mechanism of the formation of the value of franchise assets and how to make a fair determination of their value based on the actual status of the assets.

At present, the present value method of income is mostly used to evaluate the value of intangible assets. The amount of excess expected income that may be obtained from the use of intangible assets in future years is converted into the current amount of funds at a certain discount rate, which is The fair value of the intangible asset.

There are certain differences between franchise rights and general intangible assets in the way of value realization. For example, franchise rights generally cannot be transferred and will not generate transaction prices; nor can they be used as long-term capital for external investment to obtain investment income, etc. wait. Therefore, the liquidity of such assets is very poor. Usually, when an enterprise with franchise assets undergoes a major overall property rights change such as reorganization or merger, it is only necessary to evaluate the franchise assets and include them in the assets if the new owner is authorized to retain the special rights of the original owner. The total value is included in asset management.

From the perspective of asset management, it is more meaningful to manage and use franchise assets well than to grasp their value. Awareness of their value will help asset holders dispose and utilize such assets in a targeted manner to serve corporate operations and development. What is the difference between franchise and exclusivity?

Franchise: A special authorization to operate a certain or a certain type of goods or services within a specified time and within a certain region. Generally, it is a license approval issued by the national administrative agency for products that require a business license, such as tobacco business, alcohol business, etc. Exclusive right to operate: an authorization to exclusively operate a certain or a certain type of goods or services within a specified period of time and within a certain region. It is generally authorized by an agreement made by the manufacturer or brand owner. Exclusive operation rights can include franchise content, and franchise rights can form an exclusive operation form within a certain region.

What is a franchise and exclusive sales?

Franchising means that the franchisor uses its own business resources such as trademarks (including service marks), trade names, products, patents and proprietary technologies as a franchise The contract is granted to the franchisee for use, and the franchisee shall engage in business activities under the franchisor's unified business model according to the contract and pay corresponding fees to the franchisor.

Compared with direct-operated chains, franchising not only reduces the operating costs of the franchisor and expands the market; it also reduces the investment risk of the franchisee and is conducive to entrepreneurship; at the same time, because it can ensure the same product quality And services are more beneficial to consumers, which is a "win-win" business model. Therefore, many of the current large international chain enterprises, such as KFC and McDonald's, continue to develop and grow through franchising. The development of modern franchising in my country began in the mid-1980s. By the end of 2011, there were more than 5,000 franchise systems in my country, with a total number of franchise stores exceeding 1 million, covering more than 70 industries and formats, and franchise companies directly creating more than 10 million jobs. . At the same time, the norms and management systems for this have also been gradually established: on the one hand, supporting laws and regulations are becoming increasingly perfect. Since 2007, the "Commercial Franchise Management Regulations", "Commercial Franchise Filing Management Measures", "Commercial Franchise Information Disclosure Management Measures" and other laws and regulations have been promulgated and implemented. In 2012, the "Commercial Franchise Penalty Procedure Regulations (Draft)" has been An expert symposium was held and the announcement is imminent; on the other hand, the Ministry of Commerce has established a Commercial Franchise Management Office consisting of six departments, including the Circulation Development Department, the Legal Affairs Department, the Market Order Department, the Finance Department, the Services Trade Department, and the E-Commerce Department. Further strengthen guidance and management to ensure market order and healthy development of the industry