A franchise may be defined as a special kind of a licence agreement. The English verb “to franchise” means one company granting another company permission to sell goods or perform services in a specific area. In Europe and in Poland, the defines franchise in a narrower sense. Franchise is a long-term, constant and contractual cooperation between independent entrepreneurs in which the franchisor transmits to the franchisee the information on conducting a business and leases its brand.
In a broad sense, it is an agreement in which one party grants the other party the right to use its brand name, gives his support and advice in conducting business, and supervises the operation, maintaining separation between the parties.
The European Code of Ethics defines franchising as a system of marketing goods and/or services and/or technology, which is based upon a close and ongoing collaboration between legally and financially separate and independent undertakings, the Franchisor and its individual Franchisees, whereby the Franchisor grants its individual Franchisee the right, and imposes the obligation, to conduct a business in accordance with the Franchisor’s concept.
The right entitles and compels the individual Franchisee, in exchange for a direct or indirect
financial consideration, to use the Franchisor’s trade name, and/or trade mark and /or service mark, know-how, business and technical methods, procedural system, and other industrial and /or intellectual property rights, supported by continuing provision of commercial and technical assistance, within the framework and for the term of a written franchise agreement, concluded between parties for this purpose.
Differences between commercial and social franchising
In light of the information presented above, social franchising poses numerous questions. The basic difference between a commercial and a social franchise is the social scope of its activities and the fact that the franchisor does not have any financial benefits from granting its knowledge (license) to the franchisee, similarly to commercial franchising.
Recently in Europe there has been an observed development of model examples of social enterprise, which are replicated based on a franchise approach, for example, in Italy (Le Mat chain of hotels), in Sweden (Villa Vägen ut! half-way houses), Great Britain (Care and Share Associates care services - project conducted by Sunderland Home Care Associates Limited), or Germany (CAP supermarket chain).