A franchise can be defined as a right that is generally approved for someone or a faction of people allowing them to vend merchandise or services of a company within a certain region. A person who acquires and maneuvers a franchise is referred to as a franchisee. The word franchise is used to refer to businesses that are managing a franchise. The franchisee usually buys a franchise from the franchisor, the franchisor in this case happens to be the company or a firm that has some merchandise or services that are in high demand (Brown 3). A lot of people do relate fast food businesses such as McDonald’s, Domino’s Pizza with franchising, however, there are different types of franchises ranging from automotive, financial franchising, health and fitness franchising to pet franchising. In the real sense, there are more than a hundred and twenty franchises. A franchisee always follows definite rules and conventions that have been laid down by the franchisor; the franchisee has to pay a franchise payment or royalty charge, an upfront payment and a license fee to the franchisor (Mendelsohn 23).
There are various advantages of a franchise. The first one, since the company’s image and product awareness are well-known or established, many customers or consumers are often comfortable buying goods and acquiring services from a company they trust, e.g. McDonalds. The second, a franchisor also gets general training and support from the franchise owner. The third, one can also set up other businesses since the franchise business is already successful. There are thirty three countries in the world that have laws which do control franchising. The majority of these countries has laws that influence franchising either directly or indirectly. Some of the countries that have franchise laws are the United States of America, Russia, Spain, Brazil, China, India, Norway, United Kingdom etc.
Franchising in India
Franchising in India is still in its early stages. India in-fact held her first ever exhibition in the year 2009. However, it has a tremendous franchising market since its population contains a three hundred million middle class that is not reserved on spending. Indian population is diversified and entrepreneurial in quality. The country has two main commercial laws that govern franchise agreements; they are the contract Act of 1872 and the specific relief Act of 1963. These two laws present precise enforcement of covenants in a contract and the remedies that provide for damages when the contract is breached. The contract act of 1872 is based on the ideology of English common law. However, it is not applicable to all states, it excludes the states of Jammu and Kashmir. It settles on conditions by which terms made by those signing a contract shall be legally binding on them (Brown 70).
The specific relief act grants remedies for damages that arise in case of the violation of a contract. It essentially guarantees that there are rights that cover the committed wrongs. It also does not cover the states of Jammu and Kashmir (Sidhpuria 80). Franchise business would readily adapt to the Indian culture, which has been dynamic over the years, embracing cultures from some of its neighbors. It is thus a land of diversity and hence starting up a franchise would not be difficult for one, considering that the population is made up of a large middle class. The magnificent mixing of ancient and modern cultures in India has also made it a touristic haven hence the establishment of the franchise would be easy.
Franchise in China
Chinese economy is among the leading economies in the world. Franchise development in China came into view during the late 1980’s. The first Chinese franchise outlet was opened in its capital city Beijing. However, it faced considerable problems such as franchisers providing poor quality businesses and others swindling franchisees of money (Pan 50). Franchisees also held back payment for the franchisers and violated franchisees intellectual property rights. All these happened due to the substandard legal environment in China. As of today, China has the large amount of franchises in the world, although the extent of their operations is small. Each system of the franchise has a middling of 43 outlets. China modernized its franchise law, measures for the administration of commercial franchise, in 2005. The previous legislation of 1997 did not make any insertion of foreign investors. However, the law of 2005 was upgraded in 2007 (Pan 56).
The law of 2007 has forty two articles and eight chapters. It has various elements and obligations. According to the law, a franchisor should divulge any information that is requested by the franchisee. The franchisor should have operated at least two company owned franchisees in China for more than a year. The law predicts a cross border franchising as possible one but with some stipulation. The foreign invested enterprise franchisor should be registered by the regulator (Pan 67).The franchisor should also meet some requirements for registration. He should have a track record of operations and sufficient ability to supply materials. The franchise agreement should have a minimum three year term. A franchisor should have a long term operational guidance and the ability to train Chinese personnel. He should meet manual and working capital requirements. Other elements for registration are the franchisee’s classified obligations carry on indistinctly after lapsing of the franchise agreement. It is predicted that a franchisee should receive a deposit of his/her money from the franchisor, if he/she had paid money upon the lapse of the franchise agreement. On the other hand, the franchisee is barred from using a franchisor’s mark upon the expiration of the franchise agreement. A franchisor is also accountable for some actions of its suppliers. Fiscal and other penalties do apply for the violation of the regulations (Pan 106). Franchise in China has also adapted to the traditions and taste of the Chinese. Chinese culture is also dynamic and has embraced cultural peculiarities from other countries in-order to be at par with the rest of the world hence franchising is a welcome thing that adapts to the culture of the Chinese people.
Franchise in the United Kingdom
The United Kingdom does not have any specific laws that govern franchise agreements. However, franchises in the United Kingdom are regulated by the laws that are used to preside over other businesses in the country. Franchise agreements are regulated by the regular contract laws and thus they do not have to confirm to any other legislation. However, there are some self regulations under various organizations such as the British Franchise Association and the UK Franchise Organization (Mendelsohn 43). There are many franchise businesses that do not obey the rules that franchises do follow. There have been calls by various people and organizations to set up body or laws that will help in the reduction of franchises that do not follow any rules. This is because many people had incurred losses after investing in roguish franchises. The industry ministry, however, resisted any government guidelines of franchising, reasoning that government regulation might lead the public into a false sense of security (Mendelsohn 65). The ministry argued that the laws that were governing business contracts were able and adequate to protect the public. The culture diversity and tastes of the people provide the necessary market for franchising in the United Kingdom.