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What’s the difference between a distributorship and a business format franchise?
To explain the difference between a distributorship and a business format franchise (bff ), it is easiest to explain each arrangement in its own right. Operating a bff gives the franchisee the benefit of owning and running a tried-and-tested business. A bff involves a franchisor licensing a parcel of rights to a franchisee that allows the franchisee to operate a business in a uniform and prescribed manner under the franchisor’s trading name or brand. The franchised business will distribute the franchisor’s goods and/or services to customers, but the franchisee will be subject to stringent guidelines in terms of how it will operate the business. In return for allowing the franchisee to operate the franchised business, and for providing ongoing support, the franchisor will receive an income from the franchisee. A distributorship involves a manufacturer or supplier appointing a third party (distributor) to distribute its goods. Unlike a franchisee, a distributor is unlikely to receive any additional support and the distributor will be selling the goods under his/her own name or trademarks. However, a distributor is likely to have few, if any, restrictions on how the products or services are sold and is usually free to sell goods and services from other suppliers and manufacturers.
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