...Introduction to International Business Course project: Barriers for franchise business in Kazakhstan Prepared by Shynar Galiyeva 2013 Introduction Kazakhstan is the ninth largest country in the world, sharing its borders with Russia, China, Uzbekistan, Kyrgyzstan and Turkmenistan. Astana is the capital and Almaty is the largest city and considered to be a financial center of the country. The population of Kazakhstan is about, 16 million, which is low considering the large size of the territory. Nowadays Kazakhstan is known as a country committed to the principles of democracy and market-based economy. After the collapse of Soviet Union and over 20 years of transition period, Kazakhstan has developed into one of the leading economies within the Commonwealth of Independent Countries (CIS). This was achieved mostly because Kazakhstan is very rich for natural resources. Up to the present time, around, 160 oil and gas deposits have been discovered on the territory of the country. Business in Kazakhstan is often focused on the oil and gas sector, which has been responsible for the country’s strong economic expansion over the last decades. However, these are not the only strong sectors of Kazakhstani economy, it possesses almost a quarter of the world’s uranium reserves, holds leading ranks in reserves of barite, chromite, phosphate, copper, lead, zinc, iron ore and gold. Although, Kazakhstan’s economic growth is profoundly dependent on the oil and mining sectors...
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...FOUNDATION Sponsored by: By Barbara Beshel CHAPTER 1 1. 2. 3. 4. 5. An Introduction to Franchising What is a franchise? What are common franchise terms? What are the alternatives to franchising? What are the advantages and disadvantages of owning a franchise? What are the legal issues in franchising? WHAT IS A FRANCHISE? A franchise is the agreement or license between two legally independent parties which gives: • a person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (franchisor) • the franchisee the right to market a product or service using the operating methods of the franchisor • the franchisee the obligation to pay the franchisor fees for these rights • the franchisor the obligation to provide rights and support to franchisees FRANCHISE AGREEMENT FRANCHISOR FRANCHISEE Owns trademark or trade name Uses trademark or trade name Provides support: • (sometimes) financing • advertising and marketing • training Expands business with franchisors support Receives Fees Pays Fees THE IFA EDUCATIONAL FOUNDATION AN INTRODUCTION TO FRANCHISING 5 TYPES OF FRANCHISES PRODUCT DISTRIBUTION Product distribution franchises simply sell the franchisor’s...
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...dream of owning their own business and being in control of their destiny. The only issue is that very few folks will actually dive in and take the risk to become their own boss. The reason for this holdback: it's the fear of failing. The rate of failures on startup businesses varies from person to person. However, Scott Shane of Case Western Reserve University often has his data cited. He states that failure rates in one year are about 25 percent and 10-year failure is about 71 percent. What do these numbers mean? If four businesses begin in one year, one business is bound to fail in that first year. 71 percent of businesses currently open will be shut down in 10 years. Understanding Entrepreneurship In Franchising Since failure rates are high, it's of no surprise that very few people will try their hand at it. Many people don't know that a way to become a business owner is to start a franchise. Franchises have less of a chance of failing and are actually do well monetarily. Using the same 10-year study from above, nearly 62 percent of franchises are still in business, an extremely high figure. Why Franchises Stay In Business Why is it that franchises stay in businesses longer than a startup company? Franchises have a large quantity of advantages that novice entrepreneurs don't have, which means the venture is less risky. Five Advantages of Franchises Advantage 1 - Training and Support Franchise businesses will give new franchise owners plenty of training...
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...Franchising is the practice of the right to use a firm's business model and brand for a prescribed period of time. The word "franchise" is of Anglo-French derivation—from franc, meaning free and is used both as a noun and as a (transitive) verb. For the franchiser, the franchise is an alternative to building "chain stores" to distribute goods that avoids the investments and liability of a chain. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. A franchise makes it possible for people who have never been in business before to run one successfully,” says Professor Lorelle Frazer, director of the Asia-Pacific Centre for Franchising Excellence at Griffith University. A major benefit of being part of a franchise is support. “When we compared independent and franchised businesses during the economic downturn we found that support made a difference to business survival,” says Frazer. “Group peer learning in properly facilitated education environments is one of the most powerful tools for franchise growth and profitability,” says Tony Arena, managing director of BCI Business Brokers. However the benefits of a franchise come at a price; some people choose an independent business for the simple reason that it can cost less to start up. But start an independent business and you’re effectively taking a gamble that there will be...
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...Part 2 A. Introduction Franchise is a method of marketing and distributing based on a two parties relationship; that is the franchisor (the owner and granter of right) and the franchisee (recipient of right) relationship. The right granted is for the purpose of running the business by using the trademark or trade name based on a specific system, at specified location or area within a specified period of time (Malaysian Franchise Association). Types of Franchise There are two main types of franchising; which are product distribution franchise and business format franchise (Beshel. B,2010). The product distribution franchises just simply sell the franchisor’s products and are supplier-dealer relationships. Under this type of franchising, the franchisor licenses its trademark and logo to the franchisees but the entire system for running their business is not provided by franchisor. There are some popular industries which lying under products distribution franchises; they are drink distributors, automobile dealers and gas stations. Pepsi, Shell, Toyota are some examples in this category. Product distribution franchise issues tend to be found in the vertical restraint literature. They typically focus on issues of exclusive dealing, inventory controls and the problem of double marginalization. Double marginalization (Kevin. J.W. 2007) refers to the problem of both a wholesaler and retailer using a price markup formula. The wholesaler sells his good to a retailer at the wholesaler’s...
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...Franchising and Franchise relationship Introduction Various researchers that have developed models for examining businesses over years assume that companies should pass through four stages during their life cycle: start-up, growth, maturity and decline. The most critical of all are the start-up and growth stages. In the first stage the business makes its primary steps in attempt to create a market presence, the primary base of customers. The start-up stage is generally characterized by innovation, high risk, and low profit margins. Stage two or the growth phase of the business is when the business establishes its niche in the market. This is the phase where the business owners start to establish their brand identity and generate brand loyalty within their customer base using sound marketing practices. Although the focus of this stage is to maintain the core customer group and build trust and goodwill among the customers, this stage is marked by a rise in consumer demand and a consequent requirement of increased inputs in terms of production, manufacturing, and general operations to keep up with the rising sales and continue growth. The growth phase is thus marked by increased sales, rise in profit margins and thus establishment of the brand name in the market. Once you have given consideration to expanding, the next step is determining the best method to grow your business. The business has many strategies available. The company can choose to go along with...
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...A FRANCHISEE’S DILEMMA GM591 December 12, 2010 Introduction The franchise restaurant sector in the business market is a huge part of our economy. Names like KFC, Taco Bell, McDonald’s, Burger King and Pizza Hut are very common in people’s everyday lives. One of the most popular and fastest growing businesses in this area amongst the names mentioned above is the Subway restaurant franchise. Subway is the world's largest submarine sandwich restaurant chain with more than 34,000 locations around the world. Subway started out as a typical business venture by its owner, Fred DeLuca, who was motivated to find a way to pay his college tuition so he could become a medical doctor. Fred took a loan of $1,000 from a friend, Dr. Peter Buck, and offered him to become a business partner in opening a submarine sandwich shop. The first store they opened was called “Pete’s Super Submarines” in Bridgeport, Connecticut in August, 1965 ("History," 2010). Subway has become the leading choice for people seeking quick, nutritious meals that the whole family can enjoy. As they continue to grow, they are guided by their passion for delighting customers by serving fresh, delicious, made-to-order sandwiches while maintaining a standard of food products and brand that is recognized globally. Subway is a registered trademark of Doctor’s Associates Inc. (DAI). DAI is the owner of the business concept and the trademark of Subway Restaurants. DAI is a privately owned company that is located in...
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...journals over the period 1996–2008, the literature is divided into the following three broad streams: franchise initiation and subsequent propensity to franchise, franchise performance and control of franchising relationships. Several research gaps and avenues for future research are identified, especially towards a systematic study of management control issues in the context of franchising relationships. Key words: franchising, literature review, management control JEL-codes: D23 – L22 – L26 – M21 – M40 2 I. INTRODUCTION This article provides an overview of the recent management literature on franchising, with special attention to its management controli aspects. Franchising plays a prominent role in business life today. This form of entrepreneurship is increasingly being adopted in a variety of sectors, especially by retailing and service companies such as McDonald’s, Holiday Inn, Body Shop and Benetton. According to the Deontological European Code of Honour (2004), franchising is a system for the sale of commodities, services and/or the application of technology. It is based on a close and continuing cooperation between juridical independent and financially autonomous companies, namely the franchisor and his individual franchisees. Hereby, the franchisor grants his franchisees the right and he puts them under the obligation to exploit a business in accordance with the business concept. Therefore, the franchisee pays the franchisor an initial franchising fee, periodical royalties...
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...hometown, and semis retire while running his own business. He came to this conclusion due to the fast paced job as well as the travelling the job entitled. Three years earlier, Fred took the buyout funds from the company he worked in and invested them, with his wife, in a car repair franchise in a suburb in Indianapolis. He has been expanding since and seven years later he holds five franchised locations around Indianapolis. Revenues from the first two car repair shops financed his last two businesses. He currently has twenty-seven full time employees, yet feels the stress from running the shops for ten-hour work days and evenings full of paperwork. It seems Fred is working more now that he is semiretired than before as a senior executive. Fred is not going thru this by himself since this situation happens often with franchisees and the misconception of being their own boss and their own company. They believe that others will take care of all the headaches and exposure of the business, yet the franchisor is the one making the money in royalties and advertisement while dictating how the business must look and even be ran. If Fred does not comply then the franchisor can take the franchise away at any moment and Fred would be left with nothing. Assess Fred’s capability and capacity to be a franchisee in general and for this specific company. Seems to me that Fred definitely has the capability and capacity to be running a franchise of car shops. This is due to his thirty-year...
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...Running head: MCDONALD’S CORPORATION McDonald’s Corporation Your Name Name of Institution 1 2 MCDONALD’S CORPORATION McDonald’s Corporation Executive Summary McDonald’s restaurant was founded by Maurice and Richard McDonald, two brothers who started the restaurant’s legacy as a small business in California that served milkshakes and hotdogs. The McDonald brothers soon introduced hamburgers to their restaurant menu, after reevaluating the business. In addition, the brothers implemented what they called the “speedy service system,” and this was comprised of an all-male staff working in an assembly line manner while serving customers from a 9-item menu. The McDonald’s business concept expanded rapidly and the first McDonald’s franchise was sold to Neil Fox in 1952. Mr. Fox opened a Phoenix, Arizona restaurant. The second franchisee was Ray Croc, who was the most successful franchise agent in the United States. Since its launch, McDonald’s Corporation has undergone several problems due to mismanagement, poor marketing, increased competition, and noncompliance of franchisees. Facing these problems has resulted in the corporation implementing new business strategies aimed at improving the corporation’s performance in an industry of competitors (Kerry, 2010). This paper focuses on how the corporation’s management and leadership used the adoption and implementation of strategic initiatives to attain its current status. Planning McDonald’s soon saw competition...
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...the case: McDonald's gave Dayan an exclusive franchise to operate McDonald’s restaurants in Paris, France. McDonald’s required Dayan adhere to all quality, service, and cleanliness standards set by McDonald’s, Dayan agreed. The parties made an agreement which stated the reason for Dayan must maintaining QSC standards was that a “departure of restaurants anywhere in the world from these standards impedes the successful operation of restaurants throughout the world, and injures the value of [McDonald’s] patents, trademarks, trade name, and property.” Dayan promised he would not in violation of the standards unless he got prior written permission from McDonald’s. But McDonald’s found Dayan violated these standards for several years, so it wanted to terminate the franchise. Then Dayan filed a lawsuit to enjoin the termination. Identifying the client’s problem： McDonald’s rendered Dayan an exclusive franchise, and required Dayan comply with QSC standards; Dayan agreed. McDonald’s found Dayan in violation of these regulations, and sought to terminate the franchise; Dayan filed a lawsuit, wanted to enjoin the termination and one of the justifications was that McDonald’s was obligated to provide him with the operational assistance necessary to enable him to meet the QSC standards, but it did not. What things McDonald’s should do in order to avoid such kind of cases. Four alternative courses of action： 1 background check for franchise owners; 2 set McDonald’s flagship store, organize...
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...Running head: MCDONALD’S CORPORATION 1 McDonald’s Corporation Your Name Name of Institution MCDONALD’S CORPORATION 2 McDonald’s Corporation Executive Summary McDonald’s restaurant was founded by Maurice and Richard McDonald, two brothers who started the restaurant’s legacy as a small business in California that served milkshakes and hotdogs. The McDonald brothers soon introduced hamburgers to their restaurant menu, after reevaluating the business. In addition, the brothers implemented what they called the “speedy service system,” and this was comprised of an all-male staff working in an assembly line manner while serving customers from a 9-item menu. The McDonald’s business concept expanded rapidly and the first McDonald’s franchise was sold to Neil Fox in 1952. Mr. Fox opened a Phoenix, Arizona restaurant. The second franchisee was Ray Croc, who was the most successful franchise agent in the United States. Since its launch, McDonald’s Corporation has undergone several problems due to mismanagement, poor marketing, increased competition, and noncompliance of franchisees. Facing these problems has resulted in the corporation implementing new business strategies aimed at improving the corporation’s performance in an industry of competitors (Kerry, 2010). This paper focuses on how the corporation’s management and leadership used the adoption and implementation of strategic initiatives to attain its current status. Planning McDonald’s soon saw competition from...
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...Original Glazed® doughnut. Headquartered in Winston-Salem, NC, founded in 1937. Over 580 locations in 19 countries Strategy KKD executives believe the key to improving the firm’s performance and capitalizing on industry growth is to increase the percentage of stores operated by franchisees. Problems Buying and operating a franchise can be a great way for an entrepreneur to get into business with a proven brand, business model, and marketing strategy. However, while most franchises can offer sound home office support and allow an enthusiastic entrepreneur a way to make a great income, there are still franchise risks that are out of the hands of the individual entrepreneur. Krispy Kreme is one example of a franchise-gone-wrong. The Krispy Kreme craze in the early 2000s drove millions of customers to stores, waiting in line for the cherished fresh glazed delicacies. As a result of the demand, the number of Krispy Kreme franchises exploded, with new entrepreneurs trying to enter in the market. New stores emerged in 400 locations all over the country and the world, and the Krispy donut that enjoyed a large fan base. However, the rapid growth became a problem for Krispy Kreme, and a few years later, the financial fallout became apparent. One of the reasons behind Krispy Kreme’s downfall was its incredibly rapid growth. During the start of the glazed donuts’ popularity, people would wait in lines for a rare taste of the warm delicacies, which were beautifully...
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...consequences of decisions can be ranged from minor results to career threatening. In spite of the results, it is significant to understand when a decision has to be made and the best way to do it. A rational decision making model provides a structured, sequenced and wise way to decision making and it is based on the logic of optimal choice that would maximize the profit. Using such approach helps to ensure discipline and consistency that is built into decision making process. As the word rational tells us, this approach brings logic and order to decision making. However, in Administrative decision making model people with different levels of motivation have no time to make decisions, therefore they usually try to find short and easy ways to problems. Under the administrative model, decision maker never tries to optimize but instead satisfices and treats objectives as loose constraints. While rational model requires optimization, choosing the alternative with highest value, satisficing, administrative model, requires finding the first option with an acceptable value. For example, let`s assume that I had a house I wanted to sell. If I listed my house for $100,000 and had 10 offers for it, I could choose with either method. With rational method, I would determine which offer had the highest value in terms of conditions and price. On the other hand, with Administrative model, I would accept the first offer that met my lowest expectation. Administrative strategy may lead to a reduced decision...
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...noticed when reading through the ZZolt business plan. The first one being that Doug has equipment that Saira can use in addition to the equipment that she is already purchasing. If Saira doesn’t want it then Doug is going to sell the equipment which has a market value of $3,000 and no book value. Another value option that was in the business plan is the babysitter dilemma. Saira could use her mother as a babysitter for free or she would have to spend $6,000 a year. 4.) One of the biggest aspects of the ZZoltt business plan that could be an ethical trap is Saira’s plan to recommend three contractors to each client. There could be a conflict concerning Saira’s recommendation of contractors and her husband’s contracting business. If her husband is getting a lot more business than any other contractor that she recommends, people will think she is purposely giving her husband business. People might also think that she is giving bad recommendations about other companies just for the sake of her husband’s business. Another piece of ZZolt’s business plan that can be an ethical trap is the requirement of all franchises to be out of the state of Michigan. Saira’s company can make more money than any other franchise because she is the only one that receives the Michigan Energy Incentives. Also, no other state has a rule that limits the number of franchises so all franchisee could face competition from one another while Saira is alone with business guaranteed for herself. 5.) The greatest...
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