What is branding?
Assuming you’re new to the business world and know little or nothing about branding, it’s a business relationship between two parties, who are contractually bound to partner together to promote a product or service by specifically identifying it with a particular brand. The brand holder, hereafter, coined as the brandor, is the party who owns and is lending the rights to a brand name. The brand recipient, hereafter, coined as the brandee, is the party who is receiving conditional use of the brand name.
Branding can be structured in a number of different ways. FRANCHISING is one. A franchise, in cookie cutter-like fashion, is a reproducible, turnkey unit of an existing business model that’s already been proven to be successful. It’s set in a tightly controlled environment, whereby the unit is required to follow various rules, regulations, policies, procedures, and methods of business operation. They must not be altered or varied from, and must be strictly adhered to at all times. It’s a very militaristic structure, that not only requires an extreme willingness to comply, but won’t tolerate any lack of consistency in the form of deviations from the structured brand name, issues relating to standardized signage, conflicts with corporate colors, or failure to follow standardized hours of operation.
A franchise is not an entity where you’re left completely on-your-own, to either sink or swim for yourself. That’s because the franchisor is legally bound to provide a predetermined amount of help, support, guidance, assistance, and / or participation. Because of this, it’s common to be able to start-up a business from scratch without any prior experience via this entity.
Various components constitute the body of a franchise. For example, the party lending the business model is referred to as the franchisor. The party receiving the business model is referred to as the franchisee. Both parties are referred to as the franchiser. The legal agreement binding the franchisor and the franchisee is called the franchise agreement. In return for use of their business model, the franchisor receives monetary consideration from the franchisee in the form of fees.
The initial fee, usually a onetime fee, to buy into the franchisor’s system is called the franchise fee. The reoccurring, monthly fee, for continued use of the franchisor’s system is called a royalty. There are three types of royalties that a franchisor can choose to implement: flat, floating, or percentage. A flat royalty is affixed at a preset amount, regardless of the franchisee’s monthly revenue level, and continues at that amount month after month. A floating royalty varies depending on the level of monthly revenue, never dipping below a preset minimum amount, but rising above it when higher than normal levels of revenue are achieved. A percentage royalty is set at a predetermined percentage level, thus the amount of the royalty can vary upward or downward, depending upon the monthly movement of revenue.
Even though the aforementioned fees are standard practice, you should still be on the lookout for others, such as an advertising fee and a compliance fee. The former is a reoccurring, monthly fee used to fund the cost of promoting the franchisor’s system and building brand awareness through corporate based, advertising campaigns. The contribution is usually between 2 and 3 percent of monthly revenue. The latter fee is used to fund the cost of periodically ensuring that franchisees remain in compliance with corporate policies, procedures, and business operations and is normally instituted whenever an inspection takes place. Reputable franchisors will reveal all of their fees up front, but some unscrupulous ones will try to mask or hide certain fees. So, always beware!
Another way in which branding can be structured is through LICENSING. A license is a contractual agreement between two parties, whereby the owner of proprietary property grants to a second party the right to use the property. The property can be physical, such as a product or component; it can be intangible, like a name or service; or it can be intellectual, in the form of a formula or trade secret.
As it applies to the fitness industry, and in comparison to franchising, licensing is set in a much looser, more laid-back, less controlled, less structured environment, adhering to a laissez-faire, leave ‘em alone, hands-off attitude. Thus, there tend to be inconsistencies from one licensee to the next. You’ll often find that deviations from the structured brand name are tolerated. Standardized signage is either nonexistent or deviations from it are permissible. Standardized corporate colors are either nonexistent or deviations from them are allowed. And hours of operation are usually left up to the licensee.
A license is an entity where you could be left, more or less, on-your-own, to either sink or swim for yourself. That’s because the licensor is not legally bound to provide a predetermined amount of help, support, guidance, assistance, and / or participation. Because of this, it can be more challenging to start-up a business from scratch without any prior experience via this entity.
Various components constitute the body of a license. For example, the party lending the property is referred to as the licensor. The party receiving the property is referred to as the licensee. Both parties are referred to as the licenser. The legal agreement binding the licensor and the licensee is called the license agreement. In return for use of their property, the licensor receives monetary consideration from the licensee in the form of a fee. This fee, usually an annual fee, is called a license fee. But, unlike franchising, licensing doesn’t access a royalty.
Even though the aforementioned fee is standard practice, you should still be on the lookout for others, such as, an advertising fee, a compliance fee, a project fee, and a territorial protection fee. The third one is used to fund the cost of special projects, such as, promoting and holding an annual convention, trade show attendance, or expanding website capability. The fourth one is used to protect future growth and expansion, by preventing other licensees from entering the market. So, again beware, and be sure to ask which, if any, of these additional fees will apply.
Still another way in which branding can be structured is through a DEALERSHIP. A dealership is a business arrangement between two parties, whereby one party agrees to sell the products or services of another party. It can often be an exclusive relationship, whereby the selling party agrees not to carry or sell competitive products or services plus, if physical products are involved, they may also be required to have both the facilities and the capability to provide repair service.
Various components constitute the body of a dealership. For example, the party lending the brand name and the right to sell their products or services is referred to as either the manufacturer or corporate. The party receiving the brand name and the right to sell the products or services is referred to as the dealer. The legal agreement binding corporate and the dealer is called the dealership agreement. In return for use of their brand name and the right to sell their products or services, corporate normally charges the dealer monetary consideration in the form of a fee. This fee, usually a large, onetime fee, is called a dealership fee. However, it can also be reduced to a smaller amount and assessed on an annual basis. In addition to a large, onetime dealership fee, a smaller, annual, renewal fee may also be assessed. Just like licensing, a dealership isn’t accessed a royalty. Depending on the situation, there may be other fees as well, so be sure to ask if any will apply.
This business structure, a dealership, is the basis of our unique business model.
Yet another way in which branding can be structured is through a DISTRIBUTORSHIP. A distributorship, much like a dealership, is a business arrangement between two parties, whereby one party agrees to sell the products or services of another party. But where a dealership can often be an exclusive relationship between the two parties, a distributorship usually remains nonexclusive.
So in addition to the agreed upon products or services, in a distributorship, the selling party is normally allowed to carry and sell other related and unrelated product or service lines. Plus, if physical products are involved, they’re not required to have the facilities or the capability to provide repair service.
Various components constitute the body of a distributorship. For example, the party lending the brand name and the distribution rights to their products or services is referred to as either the manufacturer or corporate. The party receiving the brand name and the distribution rights to the products or services is referred to as the distributor. In most cases, a legal agreement binding corporate and the distributor is nonexistent. In return for use of their brand name and the distribution rights to their products or services, corporate normally won’t seek any monetary consideration from the distributor, content to simply have a distribution outlet. In the event of any fees, a distributorship, just like a dealership, isn’t accessed a royalty.