What is the right competition for your franchise?
The right competition stimulates the economy and ensures a competitive and fair market. Franchisors such as the HEMA and Albert Heijn give franchisees the opportunity to operate their franchise concept. Of course the franchisor wants his franchisees to comply with (for example) certain quality and hygiene requirements.
What are the advantages and disadvantages of a franchise?
One of the advantages of buying a franchise is that the purchaser has access to a proven business system. T/F A franchise is typically attractive because it offers training, financial assistance, and operating benefits. T/F A disadvantage of purchasing a franchise is that franchisors seldom provide adequate training programs.
When do legal issues arise when buying a franchise system?
Consideration of these legal issues typically arises in two contexts: (1) pre-acquisition, when buying a franchise system, and (2) post-acquisition, when making business changes to either of the now-owned competing franchise systems.
Is it possible to operate two different franchise systems?
While there are potential benefits to operating competing franchise systems, certain legal restrictions affect the decisions that can be made. In order to derive synergies from the ownership of two competing systems, it is common to consider a number of business possibilities.
Why do franchisees call each other?
What are the main causes of competition law problems?
Why was ACM fined?
Why was the preliminary relief judge found that this non-compete clause was consistent with the cartel prohibition?
Is a marketplace ban a hard-core restriction?
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Which practice is a competitive concern for franchisees a churning B encroachment C nondisclosure agreements D royalty payments?
ANS: F The term is churning.
What are some challenges faced by franchisees?
The 7 Most Common Franchise Problems (And How to Solve Them)Long approval processes. The franchisor and franchisee are a team. ... Higher-than-expected operating costs. ... Less control over the brand. ... Not as much decision-making power. ... Different regulations. ... High employee turnover. ... Potential for brand dilution.
Which are the common considerations by the franchisees for franchising?
So before you decide if it's right for you, here are 6 factors you should consider before buying a franchise.Demand. As is the case before starting any new business, find out if there is a demand for the product or service you intend to offer. ... Track Record. ... Investment. ... Competition. ... Training. ... Restrictions.
What are the 4 types of franchise arrangement?
Below are four types of agreements franchised businesses commonly form.Single-Unit Franchise Agreement. In a single-unit agreement, the arrangement grants the franchisee the right to open and operate a single franchise unit. ... Multi-Unit Franchise Agreement. ... Area Development Franchise Agreement. ... Master Franchise Agreement.
What is the a major challenge to global franchises?
A large challenge for international franchising comes from the legal aspect of operating in another country, as you must adapt your franchise's rules to comply with their laws. Whilst this may not be an issue in certain countries, areas that might present an issue could be: Human Resource Policies.
What are the benefits and challenges of franchising?
Advantages, Challenges of FranchisingAdvantage #1 - The Experience of the Franchisor. ... Advantage #2 - Training. ... Advantage #3 - Buying and Advertising. ... Advantage #4 - Ongoing Advice, Research and Development. ... Advantage #5 - Business Synergy. ... Challenge #1 - Working Within the System. ... Challenge #2 - The Risk.More items...•
What is the most important consideration in franchising business?
Important considerations for your franchise model include fee and royalty percentage, terms of agreement, size of territory awarded to each franchisee, geographic areas in which you are willing to offer franchises, the specifics of your training program, and more.
What are the four big factors to consider when selecting a franchise?
10 Factors to Consider when Selecting a FranchiseProven sales record. The benefit of investing in a franchise is to capitalize on a successful enterprise. ... Growing market. ... Competition. ... Repeat business. ... Healthy living. ... Upsell opportunities. ... Profitable business model. ... Personal interest.More items...
What factors should you consider when evaluating a franchise agreement?
Franchise evaluation criteriaThe market. A franchise may have seen success in other territories, but how will it fare in your local region? ... The franchise's history. ... The financials. ... The training and support. ... The culture. ... The franchisor. ... The restrictions. ... The exit process.
What are the 3 basic types of franchising?
There are three main types of franchise opportunities available, these are: Business format franchises. Product franchises, or Single operator franchises. Manufacturing franchises.
What are the 3 types of franchise agreement?
When it comes to structuring franchise arrangements, there are typically three different types of franchisor and franchisee agreements.Single-Unit Franchise Agreement. ... Area Development Agreement. ... Master Franchise Agreement.
What is the most common type of franchise?
Business Format Franchise Business format franchising is the most popular type of franchise system and the one generally referred to when talking franchising. Businesses from more than 70 industries can be franchised, and the most popular are fast food, retail, restaurant, business services, fitness and other.
What could happen if a franchisee fails to conform to the franchise requirements?
The franchisee will lose the franchise.
Can you get rich owning franchises?
The bottom line is that while a franchise can make you independently wealthy, it isn't a guarantee. Choosing the right business in the right industry, and going in with preexisting entrepreneurial experience and/or existing wealth can help, but your income-generating potential may still be somewhat limited.
What comes with owning a franchise?
Essentially, a franchisee pays an initial fee and ongoing royalties to a franchisor. In return, the franchisee gains the use of a trademark, ongoing support from the franchisor, and the right to use the franchisor's system of doing business and sell its products or services.
What is the primary purpose of franchising?
The primary reason most entrepreneurs turn to franchising is that it allows them to expand without the risk of debt or the cost of equity.
Franchise and competition: case law and developments
Franchise agreements play a special role in competition law. In an earlier blog we paid attention to the main competition law principles of franchise agreements. There recently have been various Dutch and European developments in this area. The current state of affairs in the field of franchise and competition is addressed in this blog.
Competition and franchise law: a difficult combination - AMS Advocaten
The agreements between a franchisor and a franchisee are recorded in a franchise agreement.Some of these agreement are often on the intersection of competition law.
Franchising in EU Competition Law - Lexology
A key element of a franchise agreement is the licensing of certain intellectual property rights such as trademarks, designs and know-how for the use and distribution of goods or services...
Issues in Competition Law and Franchise Agreements in Australia
willing, and that once promises are made they must be kept. The Competition and Consumer Act 2010 (CCA) (the ‘Act’) and the Franchising Code of Conduct (the ‘Code’) provides for Australian franchises, and outlines the rights and obligations which franchisors and franchisees have under the legislation.
COMPETITION POLICY AND VERTICAL RESTRAINTS: FRANCHISING AGREEMENTS - OECD
10 Economics of franchising and vertical restraints The economic effects of franchise agreements are grouped into two general categories: effects on vertical co-ordination and on market competition.
Block Exemption - Franchising in Europe
Reprinted with permission of the publisher, American Bar Association Forum on Franchising, 750 North Lake Shore Drive, Chicago, IL 60611. Originally appeared in Franchise Law Journal (Fall 2000) vol. 20, no. 2, pp. 47-51.The opinions expressed in the articles presented in Franchise Law Journal are those of the authors and shall not be construed to represent the policies of the American Bar ...
How to determine if a franchise agreement violates competition law?
To determine whether a franchise agreement violates competition law, the agreement should be viewed (among others) in the light of the so-called Pronuptia ruling of the European Court of Justice. This ruling stated that franchise agreements are not contrary to competition law if certain stipulations to protect the franchisor’s knowhow, and/or the identity and reputation of the trademark are necessary. These rules have been detailed further in the Block Exemption Regulation of the European Commission for franchisors.
What is a franchise agreement?
The agreements between a franchisor and a franchisee are recorded in a franchise agreement. Some of these agreement are often on the intersection of competition law. In a recent legal action, franchisees invoked the fact that the franchise agreement is contrary to competition law, after their franchisor demanded compliance with the franchise agreement. Contract lawyer Marco Guit explains which aspects all franchisors should aware of.
What was the case before the court in preliminary relief proceedings in Rotterdam?
This was also the case in this matter before the court in preliminary relief proceedings in Rotterdam. The franchisees of a small franchise chain were obliged to purchase 90% of their products from the franchisor. When it became apparent that the franchisees did not comply with this obligation, the franchisor demanded compliance with the franchise contract. Although the court in preliminary relief proceedings did not consider itself competent to rule on this matter, it is interesting to see where exactly the boundary lies and when there is unlawful competition in a purchase obligation.
Why is free competition important in the Dutch economy?
Free competition is essential for the Dutch economy. The right competition stimulates the economy and ensures a competitive and fair market. Franchisors such as the HEMA and Albert Heijn give franchisees the opportunity to operate their franchise concept. Of course the franchisor wants his franchisees to comply with (for example) certain quality and hygiene requirements. The franchisor often overcomes this by imposing a detailed purchase obligation on the franchisee. In this way the franchisor knows that the products in the stores comply with certain quality standards.
What is the purchase obligation of a franchise agreement?
It can be tempting for a franchisor to arrange everything in a franchise agreement. It is therefore quite common that a purchase obligation of 90% or more is included by the franchisor. However, it is crucial to always keep an eye on the competition regulations. If a franchise agreement is annulled based on competition law, this has far-reaching consequences.
Is a purchase obligation of 90% too high?
This case shall therefore be assessed by a court in proceedings on the merits. This court shall probably first determine whether the franchisor owns more than 30% of the market. If this is the case, the franchise agreement shall be annulled based on the competition law. In that case the included purchase obligation of 90% is simply too high .
When an acquirer purchases franchise systems in unrelated industries, legal issues associated with competition are nil.?
When an acquirer purchases franchise systems in unrelated industries, legal issues associated with competition are nil. But when competing (or even partially competing) franchise systems are acquired, the desire to extract synergies can bring competitive legal issues to the forefront.
Why do franchisees combine?
Purchasers of franchise systems attempt to combine franchise systems to offer a broader array of products and services offerings, but also to realize the efficiencies and benefits of owning multiple franchise systems. For example, in the case of two competing brands and systems ("Brand A" and "Brand B"), such synergies might include:
Why is a franchisor change acceptable?
In some instances, the change will be acceptable because the modifying franchisor will be operating within its legal rights. In other instances, depending on the circumstances, the proposed change may violate obligations to franchisees. In these instances, a risk assessment must be made.
What should be considered before acquiring a franchise?
Before deciding to acquire and then combine competing franchise systems, the potential synergistic benefits and possibility for legal claims must be considered.
What does "shifting" mean in business?
iii. shifting – unfairly – existing business advantages from one system to the other system (for example, with regard to national accounts, customer reservations, product access or purchasing arrangements)
What is breach of contract?
i. breach of contract (for instance, for encroachment in violation of their contractual territorial rights; for efforts to impose system changes that are not permitted under the contract; and for breach of the franchise agreement transfer provisions)
Why do brands have suppliers to brands A and B?
iv. having suppliers to Brand A also become suppliers to Brand B in order to achieve better buying power and volume discounts
Why is franchise attractive?
A franchise is typically attractive because it offers training, financial assistance, and operating benefits. T/F
What are the advantages of buying a franchise?
One of the advantages of buying a franchise is that the purchaser has access to a proven business system. T/F
What are the drawbacks of becoming a franchisor?
One drawback of becoming a franchisor relates to possible new restrictions as a requirement for contract renewal. T/F
What is a franchise agreement?
An entity or invidiual granted the right to conduct business according to specified methods and terms of another party is known as a. franchisee. A legal agreement between two parties in a franchise arrangement is referred to as a. franchise contract.
Why do franchises need legal counsel?
Because the offering and sale of a franchise are more intensely regulated by state and federal laws than is the establishment of a new business, individuals and/ or firms involved in negotiating a franchise arrangement have limited need for legal counsel. T/F
When should due diligence be performed?
Conducting a thorough due diligence should always be accomplished if purchasing an existing corporation or franchise, but is unnecessary if acquiring a sole proprietorship. T/F
Who is bound by the franchise contract?
The franchisee is bound by the terms the franchise contract.
Why do franchisees call each other?
They therefore called each other to account regarding compliance with their competition restricting obligations.
What are the main causes of competition law problems?
The report showed that online sales and advertising restrictions, restrictions on online platforms and geo-blocking are the main causes of competition law problems.
Why was ACM fined?
In 2011, ACM fined four industrial laundries, on the grounds that they had breached the cartel prohibition by working together, according to ACM: the franchisees were able to influence the admission of new members and the allocation of districts.
Why was the preliminary relief judge found that this non-compete clause was consistent with the cartel prohibition?
The preliminary relief judge found that this non-compete clause was consistent with the cartel prohibition because the claimant had furnished insufficient specific and relevant facts on the basis of which the judge could assess whether competition was appreciably restricted.
Is a marketplace ban a hard-core restriction?
All in all, the ECJ found in this judgment that a marketplace ban is not a hard-core restriction. In our opinion the scope of the Coty judgment (1) is not restricted to luxury products alone and (2) is not restricted to selective distribution.