Discover the Franchise System!

The franchise concept may be new to Egypt. However, in practice, the idea of replicating another business and paying for the idea is not as foreign to the Egyptian market as it may seem. Franchising is the business practice of emulating another fully-operational and thriving business in an exact format to produce the same product or service under the same name and different ownership to generate new profits. The original owner of the business is called the franchisor, who grants the right to replicate the business and distribute products, services, and trademarks while collecting a percentage of the monthly sales called royalty fees. The entrepreneur who buys the business is called the franchisee, the independent owner and operator that purchases the franchise business concept and in return receives advertising, training, and additional support services to ensure the franchise brand will continue to succeed. Both the franchisor and the franchisee enter into a contract agreement, which typically lasts from five to twenty years. Termination of the contract is possible for the franchisee if certain requirements are not met.

According to the Federal Franchise Law in the United States, a franchise must contain three elements: one, the use of a common name or trademark for both the franchisor and franchisee; two, payment by the franchisee of a royalty fee; and three, rendering substantial assistance and guidance by the franchisor. The three requirements are loosely defined allowing the franchisor and franchisee maximum flexibility to negotiate terms within the contract. The fee can be a small, one-time fee or a percentage of monthly revenues depending on the agreement. Assistance also depends on the contract but ranges from training, operating systems, marketing, purchasing, manuals, support services, and on-going advice.

There are substantial benefits to owning a franchise business for both the franchisee and franchisor. By franchising a business, the original owner can generate a much higher degree of profits by selling the rights to an independent operator. In return, the franchisee gains a proven business model with support services, replication manuals, and training. The franchisee can have a new franchise outlet up and running in a shorter period of time than opening a new business. The franchisee is also selling a brand that comes with name recognition, which helps to promote and expand the business more quickly. Establishing a new franchise business usually involves lower operational expenses and international marketing benefits both the original business and each franchise simultaneously. Moreover, both the franchisor and franchisee have a mutual interest in the business’ success creating a team of motivated entrepreneurs.