N E W S R E P O R T V A P L A W M A Y 2 0 1 7
D O I N G B U S I N E S S I N G R E E C E
Franchising as a business choice
The term Franchising is known to most people and has gained much ground in the domestic financial life, as a business choice.
This business choice is quite interesting for:
• Companies with a strong brand name, who desire as a Franchisor to rapidly extend their network or
• New entrepreneurs who seek the creation of a business in the capacity of the Franchisee, using a well-established brand name, which enjoys recognizability in the market and can offer a market share at first, and a competitive advantage thereafter.
Franchise – Defense in the crisis
According to the new report from the FRANCHISE OBSERVATORY, which reviews the first four months of 2015, motility in the franchising sector continues to grow, both as a way out of the crisis, and as the utilization of opportunities emerging through the crisis.
With more than 500.000 companies, which did not survive in the past five years, and with the unemployment “galloping” at a rate of 30%, franchise strings continue to grow and – through the important privileges they offer to the franchisees – they secure the viability of their networks.
Source: www.franchise.gr, the FRANCHISE OBSERVATORY is the permanent mechanism for monitoring and analyzing the franchising in Greece, operating under the umbrella of the FRANCHISE BUSINESS.
Success factors for a Franchising co-operation
• Product or service with a strong brand name
• Contract with advantageous terms and conditions
• Preparation and distribution of manuals
• Good communication
• System-controlling
Things that you should particularly take into account:
Special emphasis must be shown by both parties to the more specific terms that will be included in contact concluded between them, which by its nature as a mixed contract, presents a complexity, since it must cover composite legal aspects that relate to intellectual property, lease law, contractual law, commercial law etc.
Our firm, with specialization in Franchising law and a years-long experience in this field, we do not only offer consult for the content and the terms and condition of such contract, but we carefully review from stage one, together and in co-operation with our client, if this choice indeed matches its business plans, its company’s profile and/or if its business idea coincides with the Franchising System.
In parallel, we represent our clients in case of discrepancies or conflict in the context of the operation of a Franchising Contract, either in the capacity of specialized Legal Advisors or as Mediators in order to rapidly resolve such a dispute.
Not only do we offer consult in relation to the contents and the terms and conditions of a Franchising Contract, but we examine if this choice indeed matches the business plans of our clients and if it has fully realized the aspects of such a commercial co-operation, for the advantages and disadvantages thereof.
The main conditions of franchising:
Franchising: The continuous commercial co-operation between two companies, based on which a company, the franchisor, grants to the franchisee, the right to exploit the franchising package, against a direct or indirect financial consideration.
Franchisor: the company which grants, against a direct or indirect financial consideration, the right to exploit the franchise system to the franchisees.
| Advantages for the Franchisor: | Disadvantages for the Franchisor: |
|---|---|
| Expansion of the network of the existing company, avoidance of start-up and maintenance expenses for a new store, possibility for continuously receiving consideration etc. | You depend on the performance of the Franchisees, since only one person can damage the reputation of your network. Investment in systems for the preservation of the quality of product or service. |
Franchisee: The company or the person to whom the exploitation right of the franchise package is conceded by the franchisor, for the purposes of trading specific types of products and/or provision of services.
| Advantages for the Franchisee: | Disadvantages for the Franchisee: |
|---|---|
| Exploitation of the experience, reputation, recognizability and preexisting clientele of the franchisor, promotion of a well-established product or service. You benefit from the training offered by the franchisor, as well as any repeat training. | Your independence as a businessman is limited; you depend a great deal on the Franchisor. Reduced risk often entails reduced profits. You have restrictions as regards the area of your activity. |
N E W S R E P O R T V A P L A W M A Y 2 0 1 7
D O I N G B U S I N E S S I N G R E E C E
Franchising as a business choice
The term Franchising is known to most people and has gained much ground in the domestic financial life, as a business choice.
This business choice is quite interesting for:
• Companies with a strong brand name, who desire as a Franchisor to rapidly extend their network or
• New entrepreneurs who seek the creation of a business in the capacity of the Franchisee, using a well-established brand name, which enjoys recognizability in the market and can offer a market share at first, and a competitive advantage thereafter.
Franchise – Defense in the crisis
According to the new report from the FRANCHISE OBSERVATORY, which reviews the first four months of 2015, motility in the franchising sector continues to grow, both as a way out of the crisis, and as the utilization of opportunities emerging through the crisis.
With more than 500.000 companies, which did not survive in the past five years, and with the unemployment “galloping” at a rate of 30%, franchise strings continue to grow and – through the important privileges they offer to the franchisees – they secure the viability of their networks.
Source: www.franchise.gr, the FRANCHISE OBSERVATORY is the permanent mechanism for monitoring and analyzing the franchising in Greece, operating under the umbrella of the FRANCHISE BUSINESS.
Success factors for a Franchising co-operation
• Product or service with a strong brand name
• Contract with advantageous terms and conditions
• Preparation and distribution of manuals
• Good communication
• System-controlling
Things that you should particularly take into account:
Special emphasis must be shown by both parties to the more specific terms that will be included in contact concluded between them, which by its nature as a mixed contract, presents a complexity, since it must cover composite legal aspects that relate to intellectual property, lease law, contractual law, commercial law etc.
Our firm, with specialization in Franchising law and a years-long experience in this field, we do not only offer consult for the content and the terms and condition of such contract, but we carefully review from stage one, together and in co-operation with our client, if this choice indeed matches its business plans, its company’s profile and/or if its business idea coincides with the Franchising System.
In parallel, we represent our clients in case of discrepancies or conflict in the context of the operation of a Franchising Contract, either in the capacity of specialized Legal Advisors or as Mediators in order to rapidly resolve such a dispute.
Not only do we offer consult in relation to the contents and the terms and conditions of a Franchising Contract, but we examine if this choice indeed matches the business plans of our clients and if it has fully realized the aspects of such a commercial co-operation, for the advantages and disadvantages thereof.
The main conditions of franchising:
Franchising: The continuous commercial co-operation between two companies, based on which a company, the franchisor, grants to the franchisee, the right to exploit the franchising package, against a direct or indirect financial consideration.
Franchisor: the company which grants, against a direct or indirect financial consideration, the right to exploit the franchise system to the franchisees.
| Advantages for the Franchisor: | Disadvantages for the Franchisor: |
|---|---|
| Expansion of the network of the existing company, avoidance of start-up and maintenance expenses for a new store, possibility for continuously receiving consideration etc. | You depend on the performance of the Franchisees, since only one person can damage the reputation of your network. Investment in systems for the preservation of the quality of product or service. |
Franchisee: The company or the person to whom the exploitation right of the franchise package is conceded by the franchisor, for the purposes of trading specific types of products and/or provision of services.
| Advantages for the Franchisee: | Disadvantages for the Franchisee: |
|---|---|
| Exploitation of the experience, reputation, recognizability and preexisting clientele of the franchisor, promotion of a well-established product or service. You benefit from the training offered by the franchisor, as well as any repeat training. | Your independence as a businessman is limited; you depend a great deal on the Franchisor. Reduced risk often entails reduced profits. You have restrictions as regards the area of your activity. |
Franchise package or package deal: The total of intellectual or industrial property rights that concern trademarks or brand names or distinctive characteristics of stores, use standards, templates, models, patents, as well as the necessary knowhow to be exploited, which are conceded by the franchisor to the franchisee, for the purposes of trading specific types of products and/or provision of services to end users.
Franchise Contract: The bilateral legal contract between the franchisor and the franchisee, where the terms of co-operation are thoroughly and clearly depicted, including their rights and obligations.
Entry fee or initial franchise fee: The lump-sum paid by the franchisee to the franchisor upon the execution of the franchise contract, in order to be included in the franchise network. The entry fee represents fees for: development, transferred know-how, rights for the commercial use of trademark, goodwill, initial stages (provision of manuals, initial training, organizing of the store).
Franchise fee: The manner in which the franchisor is constantly remunerated by the franchisee. The usual manner is in the form of a percentage on the turnover of the franchisee. Another manner is the surcharge on the prices of the products or services the franchisor provides to the franchisee.
Royalties or continuing fees: Monetary amounts paid by the franchisee to the franchisor in regular intervals throughout the whole term of the contract, in consideration for the continuous support provided by the franchisor to the franchisee.
Legal framework: The conditions governing the franchise contract derive from the Regulation (EC) 4087/1988 of the European Commission, as preserved in force with Regulation (EC) 2790/1999 of the above Commission. In Greek practice, the franchise contract is a framework-agreement and constitutes a mixed contract in the context of the principle of the freedom to contract which is not specifically regulated by the law and incorporates the elements of most contracts, such as lease contracts of a profit-making object, agreements for the provision of independent services and mandate agreements.
Obligations of the Franchisor: granting of directions to the franchisor for the manner it shall start-up and operate its business, training of the franchisee’s employees etc.
Obligations of the Franchisee: Payment of the agreed upon consideration, compliance with the organisation principles, standards and commercial methods of the franchisor and of the franchising system in general etc.
Note: It is pointed out that the above outline of provisions is suggestive and summarizing and aims at providing a quick update in relation to the legal framework. Any subjection of your company to the above provisions and the conditions of this subjection constitute the object of a more complete analysis for which the provision of specialized legal advice is required.
D I S C L A I M E R
The contents of this newsletter do not constitute legal or tax advice and cannot be used as such. In case you require advice for your personal needs, please do not hesitate to contact us.
Reproduction and translation for non-commercial purposes of this newsletter is permitted, provided that reference of the source is made and the editor (VAP LAW OFFICES) is informed and a copy is communicated to it.
We remain at your disposal for any clarification and/or information.
VAP LAW OFFICES
ATHENS ǀ DÜSSELDORF
ATHENS ǀ 4 KARAGIORGI SERVIAS STREET ǀ GR 105 62 ATHENS ǀ T +30 210 3254237
DÜSSELDORF ǀ 91 PRINZ-GEORG STREET ǀ G 404 79 DÜSSELDORF ǀ T +49 (0) 211 43691229
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