A brand franchise is an arrangement between a corporation and a local retailer or wholesaler to function as the exclusive seller for the corporation’s products within a defined sales territory. In some cases, the contractual agreement will also allow the retailer to display the corporation’s logo on all sales advertisements or other promotional material. Since the agreement provides for exclusive rights to sell the products within the area, the franchisee normally has a great deal of latitude when it comes to establishing the retail price for each unit sold.
As with any type of franchise situation, the retailer or wholesaler makes certain commitments in exchange for being able to sell the products in a noncompetitive market. While these commitments vary, it is not unusual for the brand owner to have specific requirements when it comes to the display of the products within the store, the type and structure of promotional materials, and input into how any advertising through various media is conducted. Brand name manufacturers often make these requirements as a means of ensuring that the presentation of their products to consumers is in keeping with their own advertising standards,
There are several benefits of entering into a brand franchise arrangement. One has to do with the products themselves. Assuming that the brand name or names involved are well-known, the retailer will find it is much easier to gain the attention of consumers in the local market, a fact that helps to expedite the realization of a profit from the business.
Many brand name manufacturers also provide ongoing support to their brand franchise partners. This may come in the form of assistance with store remodeling, pre-printed advertising tools, or even audio and visual public relations tools that can be utilized to promote the brand. The manufacturer may also offer various other incentives, such as paid vacations or other rewards if the franchise exceeds a certain amount of sales within a given accounting period.
Manufacturers also benefit from a brand franchise arrangement. Contracting with wholesalers and retailers means that the brand owner can place the products in front of prospective customers, without the need to build and staff their own local retail outlets. The manufacturer also has the advantage of working with someone who is local to the area, and is highly likely to have an established reputation within the area. As a result of the working relationship with the brand franchise, the brand can be introduced to new areas with relatively little expense or utilization of the manufacturer’s resources.