Franchise systems are characterized by special features that are not to be found in other types of distribution. Inform yourself about the specifics of a franchise system and learn the essential facts on the subject.
The characteristics of a franchise system
A franchise system is characterized by features which make it into a cooperative and labor distributive system. For franchisees and franchisors many advantages result from this very fact.
1. Franchisors and Franchisees each make their contribution to the success
The franchisor supports its franchisees and provides the necessary resources to facilitate the start and persistence in each franchise business. He creates organizational concepts and is responsible for the growth of the operation. In addition, the franchisor trains its partners and helps the franchisees in the further development of the system.
2. The legal status
In franchising, it is the independence of the franchisor and the franchisee that hits the foreground. Both actors are independent contractors who act in their own name and for their own account. Directive related competences of the franchisor allow him to enforce a system-compliant behaviour.
3. Good organization is the key!
A clear organization is a relevant feature of franchise systems. Here, the business concept is created by the franchisor and left to the franchisee, whereby the commercial success of the franchisee is secured. This form of organization ensures that the system for both parties involved is profitable, allowing a fair profit sharing.
Apart from the clear organization, a complementary division of labor is characteristic of franchise systems. This division of labor tasks can be tailored to the skills of each employee so that everyone does what he does best.
4. Uniform appearance
A uniform appearance, along with the common image plays a significant factor for the success of a franchise system. A unified appearance, the appearance of the system is improved outwards and makes global recognition and consistent brand communication possible.
The main differences between franchising and other distribution types
1. Dealer System
The franchisee is more involved compared to the dealer in the system. Here it is less about the distribution of goods and rather about comprehensive management, organization, marketing and advertising concept.
2. Agency System / Agency System
The difference between franchisees and sales representatives (agents) is that the franchisee as an independent contractor who brings his own capital and works for himself.
3. License System
For pure licensing systems, the licensor grants the licensee the right to use intellectual property rights (for example, patented inventions). These systems do not have a service or marketing concept, which is strictly enforced in contrast to the franchise system.
Just this uniform marketing concept is one of the main features of a franchise system, as this contributes to a high binding of all parties to the system. the franchisor carries the "moral responsibility" for its franchisees, as he comprehensively supervises and supports him.
4. Branch System
Branches can be seen as branches of enterprises. So the branch manager as opposed to a franchisee is not legally separate and made in the company's own sales organization. As a result, the store manager is bound by the instructions, which is not the case with the franchisees.
In franchising, the cooperation between franchisor and franchisee plays a major role: the franchisor may give certain specifications to the franchisee, because there is a contractual arrangement. This helps to protect and ensure the uniform brand appearance.