International Franchising Guiding Principles

International franchising can be a route to rapid, successful growth for companies seeking to expand their concept beyond local borders. However, many companies have not succeeded, and for others it has proven to be a slow grind, going nowhere fast.
Domestic Franchising, as much as International Franchising, is a dynamic and evolving method of expansion and business ownership but first of all it’s an ethical way to conduct business. Here we state the International Franchise Association Network’s Guiding Principles. This Statement of Guiding Principles has been promulgated for and has been adopted by the Board of Directors of the International Franchise Association Network in a continuing effort to advance improvements in franchise practices and to enhance franchise relations.

International Franchising guiding Principle

International franchising principle 1Franchising is a unique business model.
It is in the interest of the franchisor, each franchisee, the suppliers to the franchise system and the consuming public that franchisors define, maintain and enforce Brand Standards throughout the franchise system.

International franchising principle 2It is the goal of every business that each stakeholder be successful and franchising is no different. Franchisors and franchisees need to be profitable to be successful. However, as in any business model, franchising is not immune to the risk of failure and neither the franchisor nor the franchisee is guaranteed economic success.

International franchising principle 3Franchisees should clearly understand the franchise business model before investing. It is the responsibility of each prospective franchisee to conduct a thorough due diligence of the franchise system, to retain competent legal and other advisors, and to fully understand the terms contained in the Disclosure Document before signing any Agreement.

International franchising principle 4Prospective franchisees have the prerogative, at the start of the franchise relationship, whether or not to enter into any particular franchise relationship.
Prospective franchisees may also choose to not become franchisees of any franchise system.

5While not transferring any equity in the franchisor’s intellectual property to the franchisee, franchisees should have the opportunity to monetize any equity they may have developed in their business prior to the expiration or termination of the franchise agreement.

6The licensor is the owner of its intellectual property, including without limit, its trademarks, trade secrets, methods and standards of operations and will define the terms under which it licenses to others the it’s use. It is the terms contained in the Agreement that define the license granted and which govern their relationship.

7Franchisors should clearly understand the franchise business model prior to choosing franchising as a method to expand their business concept. Franchisors should be knowledgeable and understand the financial, business and legal terms included in their Franchise Disclosure Document and Franchise Agreement.

8The franchisor has the right, as owner of its intellectual property, to include or not successor rights in the Franchise Agreement offered. The franchisor also has the right to establish the then current terms contained in the successor agreements it offers to franchisees. Franchisees may choose to negotiate, accept or reject any offer.

9Clarity and transparency is essential for establishing and maintaining positive franchise relationships and for the continuous improvements in the franchising environment. Both parties should maintain proactive business policies, communication practices and regularly consult with each other for the enhancement of their relations.

10Subject to law requirements, franchisors should focus primarily on managing and striving for improvements to their franchise system. Franchisors should support their franchisees and enforce Brand Standards. It is the responsibility of franchisees to manage the day-to-day affairs to meet the franchisor’s Brand Standards.

11A clear pre-investment disclosure will benefit both prospective franchisees and franchisors. Prospective franchisees will be better able to evaluate and make investment choices among the wide range of franchise opportunities available to them and to choose from those that meet their goals, ambitions, financial and, other requirements.

12Market Forces, and not government mandates and relationship laws, should create the climate for changes to Franchise Agreements and should drive improvements in franchising practices.