Ask the Experts

SHELLEY NADLER WRITES:
The term 'business opportunity' is very vague and can cover just about any type of business venture. We can say more definitely what a business format franchise is, as it has certain features.

A business format franchise is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of a package comprising all the elements necessary to establish a previously untrained person in a business and to run it with continual assistance on a predetermined basis. These business format elements comprise the entire business concept; a process of initiation and training in all aspects of running the business, according to the concept; and the continuing process of assistance and guidance.

A business format franchise involves the development by the franchisor of a successful way of carrying on the business in all its aspects. The franchisor will develop what may be described as a blueprint for conducting the business. The blueprint should eliminate, so far as possible, the risk inherent in opening a new business. It should also enable a person who has never before opened or operated a business to open up in a business on his own account, not only with a pre-established format, but with the backing of an organisation (the franchisor) that would not otherwise be available to them. The blueprint will also set out in detail exactly how the business should be run.

The expression 'franchise' is now popularly used to describe all those transactions in which one person permits another to do something with its property rights - for example, petrol filling stations, car dealership and use of a sportsman or entertainer's name are commonly called a franchise. A potential franchisee should always make sure that what they are being offered as a business format franchise does have the features specified above.
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