Elgar Intellectual Property Law and Practice series
Chapter 1: INTRODUCTION
Franchising is a commercial mechanism for re-engineering businesses by enabling them to unlock the commercial value and potential of their intellectual property rights in domestic and international markets. Franchising substantially contributes to the GDP of a number of EU member states. In the UK in 2009 it contributed £11.8 billion, in Germany €48 billion and France €47.6 billion. The estimated turnover of franchising in the EU is over €215 billion (US$300 billion) generated by over 9971 franchises. Franchising normally stimulates economic activity by improving the distribution of goods and/or the provision of services as it gives franchisors the possibility of establishing a uniform network with limited investment, which may assist the entry of new competitors in the markets particularly in the case of small and medium sized enterprises. It allows independent traders to set up outlets more rapidly and with a higher chance of success than if they were to set up without the franchisor’s experience and assistance. Franchisors therefore have a better opportunity to compete with larger distribution undertakings. Franchising also generally allows consumers and other end users a fair share of the resulting benefits, as they combine the advantage of a uniform network with the existence of traders personally interested in the efficient operation of their business. The homogeneity of the network and the constant co-operation between the franchisor and the franchisees ensures the constant quality of the products and services.