Franchising

What is franchising?

A franchise system consists of a franchiser and a number of franchisees, whereby the franchiser leases its brand and operating methods to the franchisee. As a franchisee, you are bound to run the business in a certain way so that the whole chain is run consistently. For the franchiser, franchising is a way of expanding the business.

For you as an entrepreneur, franchising is an opportunity to benefit from an existing brand and a working business concept. For a fee, a franchisee gets to join a ready-made organisation. Franchising is based on a partnership between two independent parties. You run your own business and are independent in terms of ownership.

Starting a business through franchising is a way to get started quickly. In addition to a ready-made brand, you get training and economies of scale (for example, in purchasing and marketing). The disadvantage is that you have to give up your entrepreneurial freedom, as you will probably have to follow the uniform concept of a franchise. Be sure to check the agreement to see what applies. You also have to expect a lot of hard work and hustle right from the start.

The franchise agreement

Once you have found the concept that suits you, it is time to enter into an agreement with the franchisor. There is no standard franchise agreement, so agreements can vary depending on the franchise chain.

All agreements are individual, but should clearly set out the rights and obligations of both parties. It is important that you read the agreement carefully and understand what it means. A lawyer who is knowledgeable about franchising can help you decide whether the terms of the agreement are reasonable.

The Swedish Franchise Association has drawn up a checklist of the points that a franchise agreement should contain, such as:

• the parties to the agreement and the purpose of the agreement
• the rights of the franchisee and in what areas
• the franchisor's obligations
• the franchisee's obligations
• undertakings (including loyalty, confidentiality and non-compete)
• confidential information/trade secrets
• marketing
• finance and administration
• fees
• term of the agreement
• dispute resolution.

More advice and tips on franchising from the Swedish Franchise Association (in Swedish)