Franchising Faqs

Franchising is a system of distribution/marketing of products and/or services and/ or technologies that is based on a contractual relationship between two distinct and independent partners, the franchisor and the franchisee, in which the former grants the latter (at a price) the right to take advantage of a series of exclusive benefits: experience, knowledge, brand, image.

Franchising as a type of distribution system has made significant inroads in the Portuguese business panorama over the last 20 years. There are already over 400 brands operating in Portugal. The sharing of knowledge, experience, risks and successes adopted this model and the business market was able to exploit and develop it.

The national and international trend to use this model to grow and expand is becoming increasingly evident and as such franchising is a reality whose importance in the business panorama cannot be ignored.

Today, franchising can be considered as truly meeting the needs and preferences of the consumers.

You can start your business with less risk and with the backing of all the franchisor’s experience. Benefit from brand strength and all the bonuses gained by being part of a network.

You gain negotiating power. As negotiations are coordinated with the franchisor, the conditions offered take into account the network’s total volume of business. This may mean significantly lower purchasing prices, better payment conditions, negotiation of exclusive products or better technical assistance contracts.

You receive operational support, advice and specialised technical support.

The franchisor also supplies a variety of continuous consultancy and support services to franchisees that may include anything from assistance to business planning. You benefit from a known brand name. Most new businesses suffer because no-one knows who they are, making it more difficult to attract new clients and making relationships with suppliers and partners more complicated.

You have greater protection against the competition and, no less importantly, you learn from other people’s mistakes. The businessperson who joins a franchising network will be warned by the franchisor about all the dangers of the business. The mistakes and adjustments made in all parts of the network are used as a kind of guide book for new franchisees. You can devote your time only to what you’re interested in. Many tasks are handled by the franchisor’s central structure and go almost unnoticed by the franchisee. The result is that you are freed from secondary activities so that you can concentrate on the more profitable processes such as sales, customer service and the general management of the business itself.

The rules of the business must be adhered to.

It is fundamental that you understand your role as a businessperson will require you to make a 100% commitment. Other than this key element, you will need to be able to make decisions, show leadership qualities, and be dynamic, enterprising and motivated.

Since franchising consists of the establishment of a relationship between two distinct entities with reciprocal rights and obligations over a certain period of time, it can be compared to marriage. In both there are mutual interests, different roles and shared objectives, an almost daily need to establish a platform for a pacific, convergent relationship. Trust, straightforwardness, clarity and transparency are values that should be present in the relationship.

It is important that the two entities should join forces of their own free will, undertaking to respect and fulfil the provisions agreed in the contract drawn up between them.

There are no dominant or submissive roles in this relationship. The brand needs both parties equally and thus the relationship is one of interdependence, with the franchisor and the franchisee working together to achieve mutual objectives.

The franchisor and the franchisee belong to an integrated team; they are “strategic partners” with the common goal of profitability and growth.

How to choose your business
You should base your choice on the following points:
– What sort of business do I identify with?
– Level of investment
– Specific demands of the business
– Franchisor support structure

To sum up, it is essential, when making your choice, that you know and identify with the business, that you receive answers to all your questions, that you have the capacity to invest, that you are able to work and are determined.

And what’s the European Deontology Code for?
A number of European associations representing a large number of operators and franchise holders have adopted a Code of Ethics that is intended to constitute a code of good behaviour and moral conduct among those involved in the franchising system.

Although the document is not legally binding, it is nevertheless important that its principles are taken into account, all the more so because their acceptance and observance are often indispensable conditions for membership of the different national associations and the European Franchising Federation. The Code of Ethics is intended to create practices accepted by the different parties involved with a view to forestalling conflicts and facilitating their resolution. Since the franchising system has now reached considerable dimensions in a wide range of European countries, not all of which have specific legislation or regulations for the sector, the intention of the associative bodies in drawing up this code is to go some way towards self-regulation of their business activities.