A franchise owner gains access to intellectual property

Generally speaking, intellectual property and trade secrets are very well-protected in corporate America. Businesses are bound by laws, regulations and codes of conduct. Violations -- such as using someone else's trademark without permission -- can be prosecuted.

The benefit of becoming a franchise owner is not typically in material goods. Most owners still need to buy their own property, pay for the construction of the store, hire their own employees and front the costs that any other business owner would need to pay.

The benefit, then, lies in that intellectual property and the fact that the franchisee is not bound by the same laws that an independent owner would be. The franchisee is allowed to use protected logos and other trademarks. Business plans are handed out. Standards are agreed upon. The franchisee often gets training from the franchisor and may even buy materials directly from that owner. This is important in the restaurant business, for example, so that customers know exactly what to expect from their meals.

Clearly, this system offers a number of potential benefits to the franchisee, such as the benefit of national advertising that helps get the franchisee business even though he or she does not have to pay for any of it.

However, it is very important for both the franchisee and the franchisor to know exactly what rights and obligations each party has. This relationship helps get around many prohibitive business laws, but neither side should ever assume anything about the contract and the relationship. It's also crucial for those who believe a contract has been violated to know what options they have.

Source: Entrepreneur, "The Rules and Regulations of Being a Franchisor," Mark Siebert, accessed March 14, 2018

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