Business Law

I chose question 2 for this discussion. What are the factors to consider when deciding whether to buy into a franchise such as McDonalds?

First one must realize that McDonalds is a chain-style business operation. Therefore the franchisee must know they wouldn't be able change the business name of the franchise.

The Franchisee has very limited say in the operation and has to follow a standardized method or operation.

A contract known as The Franchise Contract, it spells out all of the terms and conditions of the rights and duties of both the franchisee and the franchisor.

The contract presents the payment of the franchise. The business premises, which dictates whether the premises is be bought or leased. Which may also include constructing of a new building?

The franchisor can also determines where the location of the building or they can give "territorial rights" to the franchisee.

The franchisor may require businesses to use particular forms and capital structures; standard of operation.

Quality control, day to day operations are normally done by the franchisee. However, there may inspections and other form of control enacted by the franchisor.

Pricing arrangements, franchisor may require a franchisee to purchases goods and services but they for the most part can't set prices for the franchisee.

Lastly, royalties and fees are associated with owning a franchise; however most of the administrative work and marketing is done by the franchisor.

Simply, if a person desires to be independent in their pursuit of ownership - buying into a franchise will be a hard pill to swallow. On the other hand; if one desires to have a ready-made shop and generally want to invest more so than operate or start from scratch then a franchise is the way to go.

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