Franchising is an extremely beneficial method of starting and owning your own business.
It gives the right to use an established brand’s name and its trademarks with an already existing client base.
This creates way less risk than creating a business from scratch because everything has already proven successful.
However, running a franchise doesn’t come with full freedom. You must be aware of the things that are in and out of scope when starting a franchise.
These things define what is included in your franchise, what you can change, and things that are not in a franchise agreement and you can’t change.
It might be challenging to know all these, but you have to know them, so here are the details.
What Is In And Out of Scope When Starting A Franchise?
In and out of scope in a franchise is actually what you can do as a franchisee and what you can’t do.
There are many things related to a franchise that allows both sides to act by regulations and restrictions.
And things that are in and out of scope when starting a franchise become important to know what you get and what you don’t get.
Since a franchisee buys the rights to a brand and its trademarks, the franchisee must make sure that they don’t damage the brand.
The franchisor can limit many things that a franchisee can play with, but there are limits that are beyond the scope of a franchise.
What is in and out of scope in your franchise will be on the franchise agreement that both parties must sign.
Also Read: What Is A Franchise Business Consultant?
What Is In Scope Of A Franchise?
In a franchise, there are quite a lot of things that the franchisee must obey and act accordingly.
Most in-scope things are there to ensure that the brand provides the same quality everywhere and brand doesn’t get damaged.
These are some of the many things that are in scope with a franchise:
- Territory or location. The franchisor will either determine the location or approve a location that you choose,
- Operations. The franchisor will give the franchisee directives about how the franchise will be run by the franchisee, and it must be in accordance with the franchisor’s requirements,
- Training and continuous support. The franchisor will provide all the necessary training and continuous support to ensure that the staff is doing a top-notch job,
- Any fees. There are many fees associated with keeping the rights of the brand. For a business relationship to be considered a franchise, The Federal Trade Commission (FTC) states that the buyer side must pay a minimum of $500 to the brand owner.
- Trademarks/marketing. Anything related to a brand, its trademarks, and intellectual properties will be in the scope of a franchise, and you will have the right to use them and all the marketing properties.
The exact details of what is in scope and all the necessary explanations of these things must be laid out on the franchise agreement for these to be legal.
What Is Out Of Scope With A Franchise?
When you buy a brand name and operate under it, there aren’t many things that are out of scope because you must do everything the same as the original brand.
From the moment you sign the agreement, all your moves that affect the brand must go under review by the franchisor.
Here are some of the out-of-scope things with a franchise:
- You have no control over your store or anything you sell,
- You must get approval for every change you will make in the stores,
- You have to obey every guideline the brand has and every new guideline they will come up with.
So basically, there are no things that are in your control and, therefore, no out-of-scope things. Everything comes with the approval of the franchisor or their already-established guidelines.
This might make things easier for the franchisee because the franchisee doesn’t have to deal with anything, but it might also be frustrating.
How Do You Define the Scope of a Franchise?
Even though, generally, most franchisees do not have the option to change anything per their agreement, this solely depends on the franchisor.
Most franchisors do not give the option to change something because of the chance for the brand to get damaged.
However, some franchisors might play this game differently and give the franchisee some freedom.
Everything depends on the franchise disclosure agreement you sign to make the agreement official.
According to the laws, apart from the fee that the franchisee must pay to use the brand’s name, there are no other laws stating that the franchisor must handle everything.
These in and out of scopes of a franchise solely depend on the relationship between the franchisee and the franchisor.
The Verdict
Franchising is essentially an easier way of owning a business, giving entrepreneurs a less risky option to own their own business.
However, you must be aware of many things that are in and out of scope when starting a franchise.
Even though the details of these might change depending on your franchisor, it still plays a major role in the success of your franchise branch and how much you will enjoy your time.
Most of the time, anything related to the brand and how you operate the branch will be in the scope of the franchise, and you will have no control over them.
Sources
Amit Gupta is the founder of DrFranchises – a digital marketing agency that helps brands rank better on Google Maps through local SEO strategies. Amit has over 11 years of experience in digital marketing, SEO, email marketing, and social media marketing. He’s also the owner of multiple franchises and has helped countless brands achieve success online. When he’s not working, Amit can be found playing with his dog.