DEFINITION OF FRANCHISE - WHAT IS A FRANCHISE?

Franchise is a partnership-based distribution system that allows new entrepreneurs to use an established business concept for a fee. The term franchising describes a cooperative distribution system between an existing company - the franchisor - and one or more company founders - the franchisees. The franchisor grants its cooperation partners the right to use the business concept it has developed on the basis of a franchise agreement. The period during which the franchise system is operated between partners is determined by the franchisor. During this period, the franchisee may use the name, design and business idea used to sell goods or distribute services. The business idea has always been successfully tested and further developed by the franchisor. When starting a business, the franchisee takes over a business model that is already working. Îin return, the franchisee must pay fees - so-called entry or franchise fees - to the franchisor to purchase the licenses and usage rights. Îin many cases, the franchisee also pays part of the profit to the initiator of the business idea.

LAW no. 179 of October 10, 2019 defines the franchise as follows:

Franchise represents a system of commercialization of products and/or services and/or technologies, based on a continuous collaboration between individuals or legal entities independent from a legal and financial point of view, whereby a person, called the franchisor, grants another person, called the franchisee, the right and imposes the obligation to operate a business, in accordance with the concept of the franchisor. This right authorizes and obliges the franchisee, in exchange for a direct or indirect financial contribution, to use product and/or service brands, other protected intellectual or industrial property rights, know-how, copyrights, such as and signs of traders, benefiting from a continuous supply of commercial and/or technical assistance from the franchisor, within and during the franchise agreement concluded between the parties for this purpose.

5 CHARACTERISTICS OF THE FRANCHISE IN BRIEF:

  1. Proven business model
  2. Cooperative Distribution System
  3. Using an established concept
  4. Îmultiplying a business idea
  5. Partnership and sustainable success