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Understanding the Franchise Relationship

The relationship between the franchisor and franchisee must involve regulations and standards to define and protect the quality of the service or products to be provided or sold by the franchisee to the consumer. The business that the franchisee owns is one which they are licensed to carry out in accordance with the terms of their contract with the franchisor. The term of this contract may be as short as one year, or as long as eternity, but on average will be between three and five years.

Franchisees accept that in return for the advantages enjoyed by them, by virtue of their association with the franchisor and all the other franchisees, control of quality and standards in the systems is essential.

Any bad franchisee can have an adverse effect, not only on his own business, but indirectly on the whole of the franchised chain and its other franchisees.

To minimise this risk, the franchisor will impose standards and demand that they are maintained so that the maximum benefit is derived by all franchisees.

This regulation of standards however is not intended to stifle entrepreneurship and innovation at franchisee level. In fact many marketing, product or service innovations in existence in major franchise systems today are the result of ideas generated by one or more franchisees within each system.

Most franchisors do encourage their franchisees to make contributions to the development to the business of the franchised chain which their individual talent and qualities permit.

The relationship between franchisors and franchisees has often been termed a "commercial marriage". In many ways this is true, though the difference is that in the franchise relationship there must by definition be a "senior partner" - the franchisor. Also, the franchise agreement defines the entire basis of the relationship up front, so that both parties know their rights and obligations to the relationship.

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