Il franchising represents a commercial affiliation formula, this is the official name in Italian, in which there is a partnership between two business entities for the supply or production of goods/services. The Anglo-Saxon term also means "to license".
It is a'option often appreciated when starting a business because it allows you to rely on an already known name and a structured core business.
Like all formulas, franchising also presents pros and cons, to be considered carefully before signing (and committing). Let's go into more detail.
What does a franchising agreement entail?
Through a commercial contract, in franchising a partnership between two subjects:
- franchisor: the person who makes a brand available with a related business model;
- franchisee: someone who uses the franchisor's services, replicating them in their own business.
The franchisee can thus make use of logos, names, tools and operational and management procedures. To do so, he must confer a agreed investment both in the initial phase and in subsequent phases.
Franchising is therefore a model that presents multiple advantages in terms of image and success, but it requires a strong discipline, first and foremost at the contractual level. If obligations and constraints are unclear (or unconventional), some very unpleasant consequences can arise.
The relevant legislation and pre-contractual information
The reference legislation for franchising is the 129 / 2004 lawIt requires the franchisee to provide comprehensive documentation at least 30 days before signing the contract: the so-called pre-contractual information.
This ensures the full transparency of the conditions to which the affiliate is subjected. Here are the contained aspects in the pre-contractual information:
- description of the pre-registered trademark;
- financial statements for the last three years;
- services provided by the franchisor;
- definition of both initial and subsequent investments;
- terms of duration, renewal, and termination of the contract.
What happens if the franchisee does not receive the pre-contractual information within the indicated timeframe? by law? The contract may be voidable.
Things to consider before signing
In addition to paying attention to the aspects of contractual information, other potentially thorny clauses concern:
- territorial exclusivity;
- any penalties in case of early withdrawal;
- fixed royalties;
- percentages of turnover;
- software licenses;
- tied supplies.
Another delicate aspect concerns the controls to which the franchisee is subject by the franchisor To ensure brand consistency. It's important that they are fully regulated, otherwise they risk becoming invasive.
Therefore, among the most potentially disproportionate clauses, in favor of the franchisor alone, are those that provide for:
- automatic renewals;
- excessive penalties;
- restrictive non-compete clauses;
- disclaimers.
Alternative formulas to franchising, in the name of flexibility
As we have seen, franchising has stringent conditions that make it particularly delicateThis is the case with solutions like Carrefour Express, McDonald's, Carpisa, Fra Diavolo, and many others. Alongside these formulas, more flexible contractual solutions are becoming more popular.
For example, in automated businesses, Bloomest offers a business formula similar to franchising, but without the costs and constraints typical of the agreement. This is an option that allows you to benefit from a brand and a consolidated organizational model, thanks to over 1000 points of sale in Europe and the supply of Miele machines, without some of the typical obligations of traditional franchising, both financially and contractually.
However, it remains essential to evaluate with maximum transparency what revolves around the duration of the agreement, right of withdrawal and any exclusivity and liability clauses, remembering that the signature, once affixed, has a formal and concrete value. It's best, therefore, to think carefully.
