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Explanation of Franchising, Franchisor, Franchisees, Franchise fees and Royalty fees

Explanation of Franchising, Franchisor, Franchisees, Franchise fees and Royalty fees. For those of you who are new to your franchise business, you will find the terms Franchising, Franchisor, Franchisee, Franchise fee and Royalty fee. Here are the meanings and explanations of Franchising, Franchisor, Franchisee, Franchise fees and Royalty fees.

Franchising-Franchisor-Franchisees-Franchise-fees-Royalty-fees
Franchising Franchisor Franchisees Franchise fees and Royalty fees

The Meaning of Franchising

Franchising is generally defined as the rights to sell a product or service or service.

Franchise is an agreement in which one party is given the right to use and or use the rights of intellectual property or a meeting of the characteristics of a business owned by another party for a fee based on the conditions set by the other party in the context of supplying and / or selling goods and services.

Franchise as a system of distribution of goods or services to end customers with a franchisor that gives the right to individuals or companies to carry out business with brands, names, systems, procedures and ways that have been predetermined in a certain period of time and cover certain areas.

The meaning of Franchisor

Franchisor is a business entity or individual that gives rights to other parties to use and use intellectual property rights or inventions, or the characteristics of the business they have.

The meaning of Franchisees

Franchisees are business entities or individuals who are given the right to use or use intellectual property rights or inventions, or the characteristics of the franchisor.

Meaning of Franchise Fee

Franchise fee franchise is a fee that must be paid in advance before your franchise outlets start operating.

In principle, these fees are paid for:
  1. License or right to use franchised brands for the duration of the franchise
  2. The right to use (borrow) operational guidelines during the franchise period

How much is it? It is at the discretion of the franchisor. But actually this is very important for you to ask, whether the initial cost of the franchise has included the following:
  • Location Survey
  • Layout design
  • Information in the form of a list of initial inventory, including stock items needed
  • Sourching (supplier search) for initial inventory and stock of goods
  • Guidance and discussion for preparing a business plan
  • Recruitment and know the selection of the employees at first
  • Carrying out initial training
  • Supervision and launching execution

Meaning of Royalty Fee

Royalty Fee is a fee that must be paid after the franchise outlets start operating. In general the franchisor stipulates that payments must be made at the beginning of each month, for example before the 10th of every month.

The royalty method is diverse, but generally in the form of a percentage of each income received by the franchisee, by excluding the tax element, if any.

There is a set flat, whatever the turnover achieved by the franchisee, the percentage remains unchanged. But there are also those who make progressive percentages according to the franchisee's sales value with a minimum turnover limit, of course.

In principle, a royalty fee exists and is used to:
  • Continuation of the franchisor's operations in relation to ongoing guidance for the franchisee.
  • Conducting a franchise audit and business evaluation are both inseparable parts of ongoing guidance.
  • Research and development (R&D) Brand management and marketing strategy.

Conclusion

Thank you for reading Explanation of Franchising, Franchisor, Franchisees, Franchise Fees and Royalty Fees. Hopefully from this article, you will become more understanding when you are going to do franchise business or looking for understanding information about franchising.

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