What is the definition of Franchise Agreement in the hotel industry?
The franchise agreement is the lawful contract that connects a franchisor and franchisee in business.
The franchise agreement is an agreement that generally consists of terms and clauses that identify as to how a business (franchisor) agrees to give another party (franchisee) with the company’s brand, services, procedure techniques and any other support to control a similar business in swap for a early payment as well as a percentage of the produce income in type of a monthly re-occurring fee (royalty fee).
A franchise agreement is usually negotiable, and can vary in durations of a year to even undetermined quantity of years. Most general example of a franchisor is McDonalds, as the world’s biggest franchise network. In the hotel industry franchises are very familiar as they allow independent hotels to profit from the marketing influence of better brands or companies. Thereby allowing them a bigger reach far beyond anything their own assets could buy. In addition to this the franchisee remuneration from advice, SOPs, plain business financing, support and security and in general less likely to fail. On the other hand, being a franchisor means losing power over many features of your own company.