Franchise Business Relationship

Before looking for right Franchise Opportunities to get started, you must understand the nature of franchise business relationship! Federal Trade Commission (FTC) specifies that three key elements must exist in order for there to be a franchise business relationship:

1. The franchisor must grant limited rights to use the company’s trade name, service mark, logo, or other advertising symbol.

2. The franchisor must sell the rights to use systems or methods associated with operating the core business.

3. The franchisor receives a payment in return for granting the rights mentioned in items 1 and 2.

When the franchisor is also a manufacturer, the relationship can be different in the FTC’s eyes. When the franchisee is purchasing the rights only to distribute specific products without using the company’s name and identity, then different elements comprise this segment of franchising, called product distribution franchising. The most common companies using this type of franchising are beverage companies, oil companies, and automobile companies. For example, when a dealer sells Saturns or Saabs, it uses the car names on its dealership, but it doesn’t promote itself as a dealer for the General Motors Corporation.

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