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What’s the difference between product/trade name franchising and business format franchising?

Author: Shelley Nadler

answered by Shelley Nadler

Legal director at Bird & Bird

In a product/trade name franchise the franchisee will be a distributor of the product. In a traditional distribution agreement, the distributor’s business is just that. He may sell either competing or complementary products. It is unlikely that he will sell only one supplier’s products.  He will sell whatever he distributes under his own name, although he may have signs on display bearing products’trade marks representing the products in his range. He will sell his products in his own way using his own business systems and methods. He will need no special training beyond becoming familiar with the product range, its capabilities and any follow-up services that may be appropriate. He will not pay fees.  The business format franchisee’s position is in complete contrast. He will sell only the range of products associated with the franchisor’s business, using the franchisor’s name, business systems and methods. The business format franchisee will pay fees and will obtain ongoing support from the franchisor.

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