Franchising Consulting


Franchising is using of the royalty of a successful brand with the widest mean. It is an independent commercial relationship between the companies who are the copies of each other and franchisor company who have a brand and a system regarding the distribution of goods and services for a certain amount of money.

In short, franchising is the method of distribution of goods and services.

There are two sides in a franchising contract:

  1. Franchisor
  2. Franchisee

Advantages of Franchisor:

Franchisor makes a profit giving their system and brand to use to franchise.
Franchisor does not have any cost for establishment, substructure, fixed expenses, operating expenses and employee costs. Franchisor does not interested in the operating and administrative problems of the franchise company, only put forth administrative and operating principles and be pathfinder.

Franchiser gets an income from franchise company in spite of it does not have any cost or expense. This income is:

  1. Royalty which is accrualled in the beginning
  2. An amount which will be got from a certain ratio over profit on sales of goods or total gain in a period. If the total gain in a certain period cannot be defined, a fixed monthly payment will be available.

Disadvantages of Franchisor:

There is a risk of destroying of the brand and public opinion with a mistake of franchise. To prevent this risk, a very effective control mechanism should be established.

There is another risk that the franchisor cannot to get the income under several names from franchise. To prevent this risk, an effective mechanism should be established to control the cash flow of franchise.

Operation of the System:

Franchisor will give using right of the royalty of their brand to franchise, for this reason, the same system must be used in all the business places under the brand.

Franchising Contract:

These contracts have a specific structure. According to Turkish laws, franchising contracts will occur by coming together of free will and principles of both sides.

The main ingredients of the contract are as below:

  • Contract period
  • Criteria which will be applied in the end of the period and renewing the contract
  • The ratio of amounts which will be paid in the contract period and due dates
  • Using of the brand
  • Convenience to corporate identity standards
  • The rules which will be omplied in franchising period

Also, there may be some general rules regarding the activity field. (Expiration date for food, the quality and brand of the material to be used in production, etc.)

Accounting System:

The accounting system should be the same for all the members of franchising system.
The accounting system should be created by franchisor and given to the franchise company.

Internal Control:
Franchisor company should establish a very effective control mechanism. This is required for fitting the system and keeping consistency.