Frequently Asked Questions

Q. What is special about franchising?

A. Around the world, franchising is recognised as a successful method of business expansion. There are successful examples of manufacturing, retail, food and services businesses that have expanded nationally and internationally using the franchise method. It is recognised that many businesses would not have achieved their success without creating a franchise system. A franchise model allows a business to expand rapidly using the payments from the franchisee to assist in capital growth.

Q. Are there special laws that apply if a business is franchised?

A. It is important to seek professional advice before franchising any business. Many countries have compulsory laws that must be complied with before a franchise system can be publicly launched. These laws often require pre-sale disclosure or registration with a government authority or registration of trademarks.

Q. Is it important to have a trademark for a franchise?

A. Most franchised businesses have a registered trademark so that the name of the brand has legal protection. Many franchisees will refuse to negotiate unless there is a registered trademark. In some countries an unregistered trademark also has legal protection however it is often far more expensive to protect an unregistered trademark as compared with the costs of enforcement of a registered trademark.

Q. Is registration of a trademark the same in every country?

A. Most countries have a government system for registration of trademarks. In some countries they apply the concept of ‘first to use’ and in other countries ‘first to register’. It is important at an early stage to seek professional advice to protect a business’s trademark.

Q. What are some of the countries that have franchise laws?

A. The list of countries that have franchisor is continually increasing and within those countries there are often new laws that are enacted specifically for the franchise sector. Some of the countries that have franchise laws are Australia, Belgium, Brazil, Canada, China, France, Indonesia, Italy, Japan, Malaysia, Mexico, Romania, Russia, South Africa, South Korea, Spain, Sweden, Taiwan, Thailand, Tunisia, USA and Vietnam, but this is not a comprehensive list.

Q. What does the term ‘franchisor’ mean?

A. The franchisor is the business that has established the franchise system. The franchisor is usually a trading company that has the right to grant franchises to franchisees and is responsible for the proper implementation of the franchise system and standards of conduct.

Q. What does the term ‘franchisee’ mean?

A. The franchisee is the business that is granted a right to operate a business within the franchise system. Those rights are set out in a Franchise Agreement. Additional operational rules are set out in a Franchise Manual. A franchisee has the right to expand their business and in time to sell the business to a new franchisee, subject to the approval of the franchisor.

Q. What are the benefits of a franchise system for a franchisor?

A. Many franchisors have big plans to expand the business but do not have the working capital to achieve this in the short term. The franchisor can market the franchise system to potential franchisees that are willing to pay franchise fees for the right to operate a business within the franchise system using the confidential know-how and operating system developed by the franchisor. A franchisor can require an upfront payment and ongoing monthly franchise service fees (sometimes called royalties) to be paid by a franchisee. The Franchise Agreement may also specify other payments which a franchisee pays to a franchisor in exchange for the right to operate a franchisee business and the length of time for which the franchise is initially granted and other specially designed benefits and restrictions.

Q. What are some of the usual payments that a franchisor will receive?

A. At the commencement, a franchisor is usually paid an initial franchise fee. That fee is in addition to the cost of training the franchisee and assisting with the setup of the franchisee business. During the term of the franchise, the franchisee is usually obligated to pay monthly franchise service fees (sometimes called royalties) for the ongoing use of the know-how of the franchisor and the ongoing update and improvement of the franchise system. Other payments can include marketing fund contributions into a group marketing fund, technology fund contributions for research and development to keep ahead of competitors, transfer fees where the franchisee sells the franchisee business to a purchaser and renewal fees when the franchisee requests another term to be able to continue to operate the franchisee business (a request which usually occurs every five years).

Q. What are a franchisor’s options for international expansion?

A. Once the franchise system is operating profitably in one country, international expansion can occur through a variety of different strategies. The options include direct franchising, country master license franchising, regional developer franchising and joint-venture expansion.

Q. What are the services that Optivance 360 can provide a franchisor?

A. The Optivance 360’s team are franchise experts and not just technical business consultants. The Optivance 360 team provides each franchisor with a comprehensive approach focusing on delivering the best solution for a franchisor taking careful account of the current stage of development and profitability of the franchise system and the aspirations and plans for business expansion. Most importantly Optivance 360 works closely with franchisors and the management team to develop a dynamic business plan that has a sustainable competitive advantage and which takes an account the risks that the franchisor is willing to take to achieve their goals.

Q. How does the franchising process start with Optivance 360?

A. Each business and its management team have a unique history which needs to be properly understood. Optivance 360 will tailor a specific workshop schedule to fast track knowledge of the project and create a detailed strategic timeline so that the expansion plans for the business can be implemented on time and within budget. Optivance 360 will then work with the management team to implement the franchise system growth nationally and internationally.