La franchise (document en anglais)

.Functions

A franchise has different responsibilities and functions than a distributor.

Franchisees enter into a legal contract with the parent company to serve as a licensed operator under the parent company’s name and the company must provide adequate training to allow the franchisee to do so.

A distribution agreement between the parent company and a distributor or seller permits the distributor to market and sell the parent company’s products but under the distributor’s name.

.Trademarks

The franchisor, or parent company, lets the franchise use any trademarks or brand names needed to run the franchise. These trademarks bring the recognition of the parent company to the franchisee. McDonald’s is an example of a franchise with brand name recognition.

A distribution agreement does not allow the distributor to claim any trademarks or brands. Instead, the distributor uses its own business name to sell the parent company’s products.

.Obligations

A franchise must follow the guidelines and standards of the parent company. Franchises also must pay fees to the parent company for use of the company’s name and products. The parent company has an obligation to ensure that the franchise has all the resources including training and technical advice needed for success.

A distribution agreement obligates the distributor to effectively sell the company’s products by keeping enough products in stock, minimizing employee turnover and advertising the products

.Extent of Control:

A much greater degree of control is exercised by the franchisor over the franchisee in comparison with a supplier over his distributor. Most, if not all, aspects of a franchisee’s business is controlled by the franchisor, which may include:

i) Operational and Procedural guidelines which the franchisee must adhere to.

ii) Hire and train suitable staff, to the extent dictated by the franchisor.

iii) Advertise and promote the franchise as per the guidelines of the franchisor.

The above conditions are laid down generally to ensure consistency and quality within the franchise.

However, such control, in the absence of a contract to the contrary, is not exercised over a distributor, who conducts the business with regards to its operations according to his free will.

.Payment of Royalty

A franchisee is required by the franchise agreement to pay a continuing fee to the franchisor known as ‘royalty.’

Whereas, no such fee is required to be paid by the distributor to the supplier.

.Liability

As the franchisor exercises greater control over the franchisee, the extent of his liability is greater than that of supplier.

A distribution sells goods on his own behalf and is liable for his acts or omissions.

However, the extent

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