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If you want to learn more about General Franchise FAQ's and common franchise knowledge we highly recommend reading about franchising on the web or on specialized magazines, going to seminars, attending franchising shows and talking to a franchise attorney, below you can find some General Franchise Information not specific to Chilorio's.
(This information is not specific to Chilorio's , this is general knowledge information, and not specific to any franchise in particular)
What is a Franchise ?
A privilege or right officially granted to offer specific products or services under explicit guidelines at a certain location for a declared period of time.
The franchise governs the method of conducting business between the two parties.
Who is the Franchisee ?
A person or entity to whom the right to conduct a business is granted by the franchisor or licensor. A franchisee sells goods or services supplied by the franchisor or that meet the franchiser's quality standards.
Who is the Franchisor ?
The company owning/controlling the rights to grant franchises to potential franchisees.
What is Franchising ?
A long-term cooperative relationship between two entities, a franchisor and one or more franchisees, that is based on an agreement in which the franchisor provides a licensed privilege to the franchisee to operate the business.
The franchisor grants the franchisee the right to use a developed concept, including trademarks and brand names, production, service and marketing methods and the entire business operation model, for a fee.
What is an Initial Franchise Fee ?
This fee is paid by the franchisee when the franchise is granted. It is usually a one-time fee that covers the cost of training, territory analysis, site identification, specialist equipment, etc. In addition, there is often an element of recovery of franchise development costs by the franchisor. The initial franchise fee varies from company to company and it usually drops when buying more than one unit.
What are the Royalty Fees ?
These ongoing fees are what the Franchisees pay to the Franchisor usually on a weekly basis. This fee is normally expressed as a percentage of the gross revenue or sales of the franchisee after deducting taxes. There is no set formula; but they typically range from 5% to 7% a month.
What are the Marketing fees ?
Marketing fees are usually used to advertise the franchise system. This fee is usually based upon a percentage of gross sales or net sales (though it can sometimes be a stated amount). They typically range from 1% to 5% of gross sales. These fees are often put into a local, regional and/or national fund to be used for either local, regional and/or national marketing or advertising campaigns.
What is a UFOC ?
The UFOC stands for Uniform Franchise Offering Circular and it was a legal document that franchisors furnished to franchisees. As of July 2007, the UFOC has been renamed as the Franchise Disclosure Document or FDD by the Federal Trade Commission. Franchisors have until July 1, 2008 to adopt the new format.
What is an FDD?
It stands for Franchise Disclosure Document (FDD). The FDD is a legal document that Franchisors must provide to prospective franchisees at least 14 calendar days before any agreement of sale is signed and finalized. The reason for this legal document is to provide prospective franchisees with enough information so that they can make an knowledgeable decision about buying a franchise.
How quickly will the Franchisee make a profit ?
Profits, like in every business, will depend on the type of the business, quality of the products sold, marketing, on how well the owners/managers run the business, how good the location is, how well employees are managed and other factors. There is no real way to average out how fast Franchisees will see a profit because it depends on the individual franchisee.
Can Franchisees sell their franchise ?
Yes - typically they can sell their franchise to a person or entity who is pre-approved by the franchisor. Be careful of fees assessed during this process and always ask what is the process of selling a franchise once you buy it.
What does a Franchise provide ?
FDD disclosure information, Brand recognition, Marketing expertise, Training program, Site selection management, On-going support, Security of proven processes and more.
What do Franchisors look in a Franchisee ?
A franchise company is under no obligation to award a franchise to just anyone who can afford the franchise fee.
Like any good business, a franchise company will want to populate their system with great people. Since franchising has as its foundation a strong, consistent brand, a franchisor looks for franchisees who will present the brand in the most positive light. In the same manner, they will want to have only those people as franchisees who are able and willing to learn the system and work within the specific parameters of the business.
These are the most common items a franchisor looks for in a potential franchisee: Capital, Personality, Skills and Experience.
The goal for every franchisor is to have successful franchisees.
What financial assistance is available ?
Financial assistance directly from the Franchisor varies from company to company and the assistance is usually through a third party, like a bank. Financing can be a major hurdle for any potential franchisee. Start-up costs can reach a high level and it is essential that the franchisee have adequate working capital. It is important to address any financing issues during the investigation of franchise opportunities.
Is it a good idea to hire a lawyer when buying a Franchise ?
YES, it's a very good idea to get a lawyer to advise you on your purchase, it's always a good idea to get advise from other franchisees too.