Advantages and Disadvantages of a Franchising Agreement in Naples FL


Franchises offer both the franchisor – the central owner of the business model – and the franchisee – the person who is running a single or multiple units of the business model – several advantages. However, they can also come with certain disadvantages. A properly drafted franchising agreement in Naples Florida can help to clearly spell out the terms between a franchisor and franchisee. Such a franchising agreement in Naples Florida should take the following advantages and disadvantages into consideration.

Support

For the franchisee, a distinct benefit is that he or she can go into business without the risk of launching a distinct business. It allows for someone who wants to be a business owner to launch a business with a proven track record of success and a name that people know in the market. Franchisees can benefit from having this built-in customer base that may take an entrepreneur years to cultivate. Additionally, many franchisors offer ongoing training to their franchisees. A franchise agreement should specify how the franchisor plans to offer support throughout the business relationship, including a timeline for such support services.

Less Independence and Less Control

A franchisee cannot operate the business in any way that he or she sees fit. Instead, there are usually operational standards with which the franchisee must abide in order to ensure quality control and the positive reputation of the principal business. The franchise agreement should clearly state these standards and any restrictions on the franchisee’s actions, including price and geographic constraints.

At the same time, a franchisor generally does not have the same powers as it would over its own employees. Since the franchisor receives a royalty for allowing the franchisee to use its name and operating system, its primary concern is with sales, whereas the franchisee’s goal is to yield the highest amount of profits. Clear terms should be included in the franchise agreement that discuss the limitations that the franchisor has on affecting the franchisee’s profit margin.