Who are the Franchisor and the Franchisee?
The Franchisor is the person or company that owns the right to a business name and system whereas the Franchisee is the person who buys it and operates it. The franchisor sells the right to the business system for a sum of money and the franchisor would expect that the Franchisee would run the business according to the system laid out. The Franchisee generally has to pay the franchisor an ongoing payment called a royalty. A royalty is a percentage share of the turnover or profit share of the business.
Cautions for Franchisors
Here are some of the points that franchisors would have to be careful about:
- Do not make any promises to potential franchisees.
- Make sure you are clear in your discussions so that they record accurately what has been said.
- Stress to the franchisee that the success or failure would depend on their effort and also on their correct operation of the franchise.
- Documents and Disclosure for franchisees are recomm...
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