Question

Suppose that one of your friends who is about to graduate is considering purchasing a franchise. What advice would you offer him or her before signing the franchise contract? (200 words – 30 marks)

Answer 1

Before signing the franchise agreement its important to know the following details and make sure that the franchisee agree to all of these in order to avoid conflict later on.

1-The agreement should specify the intellectual property is being licensed to use by the franchiser and its prohibition or use after the contract is over.
2-To what extent the training , support and supervision is provided by the franchisor should also be clearly mentioned so that uniformity is maintained.
3- Apart from the initial fees how much ongoing royalty which is a percentage of sales will be charged by the franchisor. Also the due date and the mode of payment is to be stated.
4-The contract should be either of 5/10 years so the franchisee should see the term , the renewal is possible or not and how much is the renewal fess.
5- The agreement should contain the advertising campaigns and brand promotion that are undertaken by the franchisor and who will bear the expense.
6. What are the exit strategies which means whether the franchisees are allowed to sell their franchises at their discretion or they have to buy back at the rate determined.
7. What location you are authorized to operate, what are the exclusive rights and what operations are to be carried out to run the units