Obligations of the Franchisee in a Franchising Agreement
A typical franchising agreement is essentially a contract you cannot breach under any circumstances, unless you want to get involved in a legal dispute or lawsuit. Once you’ve signed on the dotted line, you are taking on the responsibilities necessary for the successful operation of the business in the long term. If you’re thinking of entering the franchising business, you have to be aware of the role you need to play. Your foremost responsibility is to support the business financially. You’re essentially an investor into your business, shelling a considerable amount to settle things like the initial franchising fee, as well as any extra expenses that you might need to keep the enterprise above water (i.e. equipment and maintenance costs, utility bills, etc.). You should also be aware of and able to shoulder ongoing royalty fees, typically paid monthly or quarterly and is often calculated as a portion on gross sales. Next, you should also invest time and effort. Although you don’t own the brand per se, you’re still an entrepreneur, and your presence at the business is required ten times out of ten; more so during its early days of operation. Personally overseeing your staff and the operations in general ensures that you’re always in the loop and you can immediately address any problem or issue that arises, which are quite expected in starting businesses. You’re also expected to exert effort in growing the business and upholding the brand image of your chosen franchise. Moving on, there is also your commitment to the partnership. Essentially, you still work under an umbrella corporation that monitors your actions—after all, being a franchisee means you’re assuming a partnership role with your franchisor. In that regard, you can’t put matters in your own hands. You’ll have to be able to work with your franchisor in terms of sharing business ideas and resolving relevant issues. Essentially, the previous paragraph boils down to maintaining steady communication lines with your franchisor. The top brass may require regular income and expense reports, as well as implement new rules like pricing directives. Your role as a franchisee is to test these policies, determine if they’re effective, and subsequently report back to headquarters. Lastly, it’s not just the franchisor you need to be in constant contact with: other franchisees can also help you run your business by sharing their experiences and business tips with you. For more information on this topic, simply visit franchises.about.com/od/franchisebasics/a/franchisee-role.htm.
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