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What is franchising

The term "Franchise" (a form of business) and "franchising" (as entrepreneurial activity connected with a franchise), comes from the U.S. economic vocabulary, but the origins are in medieval France. There the term "franchise”  meant the handover of privileges to a third party for remuneration. In 19th century the franchising meant commercial exploitation rights of a third party. This concept is closer to what the franchise is understood today.

The concept of franchising is a form of marketing. Today franchising means a company which acts as a "provider of franchise-franchisor". Usually it is provided to more partners - beneficiaries of the franchise - the right to sell the products or services under own name. Franchise brings all the advantages of direct sales with the advantages of indirect sales.

Franchising offers many advantages, more secure business and a relatively high return on invested capital. According to the statistics and experiences of the EU it is 6 times more successful than the business "on their own."

Definitions according to the European Code of Ethics

Franchising is a sales system, through which it markets goods and / or services and / or technology. It relies on close and continuous cooperation legally and financially separate and independent businesses, the franchisor and its franchisees. Franchisor provides its franchisees the right, while requiring them to undertake business activities in accordance with its design.

This right entitles the Franchisee to use for the direct or indirect remuneration company name and / or its trade mark and / or service and know-how, economic and technical methods and procedural system, within and for the duration of a written franchise agreement for this purpose between the parties, and for permanent commercial and technical support from the franchisor.

"Know-how" is a set of non-patented practical information, resulting from the franchisor’s experience and testing, which is secret, substantial and  could be identified;

"Substantial" means that the know-how includes information which is essential for the franchisee use, sale or resale of contract products or services, especially for the presentation of goods for sale or processing of products in connection with the provision of services, approaches to customer as well as the management  of the company.

"Identified" means that the know-how must be specified so thoroughly in order to determine whether the criteria of secrecy and substantiality; know-how, specifications may be included in the franchise agreement or in a separate document, or it can be observed by any other suitable form.

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