Not many people are aware of the complex relationships that are involved in franchising. What is generally known to many people about franchising is the use of a known trade mark in the running a particular business, which often times is widely known and that in doing so, the person running the business has some territorial rights. As franchising continues to evolve, there has been the development of complex relationships which extend beyond this understanding. Practices such as common buying, common marketing, training, specification of time spans or regions and need for uniform standards have become common defining features in franchises nowadays. With these and other developments, franchising has become a dynamic activity that is well represented in many business sectors.
The development of the Franchising Code can in part be explained by the developments mentioned earlier on at the beginning. In addition, more people are finding employment in franchised sectors, many more of the outlets used as delivery points for retail goods and services have been franchised. The turnovers recorded in franchising as an industry have drawn the attention of governments and other stakeholders. It is due to some of these factors that the code was developed with the main intention of regulating franchising as an industry. Within the franchising code, an important part is that there is a wider definition of what constitutes a franchise arrangement as it applies in commerce.
Furthermore, the Franchising Code explains clearly the relationships between parties to a franchising agreement, which include the franchisor and a franchisee .this mostly includes the terms under which both parties will work under during their franchising agreement and the responsibilities that each party has to the other. So it is important for those intending to go into a franchise to be aware of the codes provisions in regard to the business of interest. With a clear understanding of what the code provides, those intending to start a franchise will be better place to make informed decisions and choices as well.
Some time back, there have been a number of cases appearing in courts in different parts of the world involving franchising arrangements. If such disputes arise, the Franchising Code is often used as a reference guide during the arbitration of the disputes. The reason why the code is indispensible in dispute arbitration is that the code makes important provisions which span across a number of issues such disclosure responsibilities by the franchisors to the franchisee, whether the franchisee is well informed and advised in regard to the particular franchise business, provisions relating to the following aspects; how the agreement can be dissolved, how disputes will be handled, how responsibilities will be assigned between the franchisor and the franchisee and records of any financial commitments made the franchisee to the franchisor in regard to any activity related to their franchise agreement.
Considering the importance of the Franchising Code, both to the franchisor and the franchisee, it is of great importance, especially to potential franchisees to understand well what is provided in the code.
