...Chapter 4 Franchising and the Entrepreneur Introduction Franchising is an important part of American business and this powerful distribution and marketing system is also influencing the global economy. Franchising can be traced to Civil War times, when Isaac M. Singer devised a more efficient, less expensive way to sell his Singer sewing machines through franchised outlets. Retail outlets dominate franchising, but increasing demand for consumer and business services is producing a boom among service-oriented franchises. The Franchising Boom! Franchising has experienced exponential growth rates in the United States and abroad and its growth in recent years is phenomenal. Franchising is a major reason for U.S. business growth and dominates industries such as lodging, real estate brokerage, quick-serve restaurants and convenience stores and is become increasing poplar in other industries Global Franchising Franchises account for more than 50 percent of all retail sales, totaling more than $1.4 trillion. More than half of U.S.-based franchise companies support international operations and 30 percent of their franchise units are located on foreign countries. The markets to watch include Europe and Pacific Rim countries. WHAT IS A FRANCHISE? Franchising - Defined Franchising describes a semi-independent business owners that pay fees and royalties to a parent company in exchange for the right to sell its product and services under the franchiseer’s trade name and often...
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...1. Franchising can be described as a 'business marriage' between a 'franchisee' and a 'franchisor'. As the franchisee - the purchaser of the franchise - you pay an initial investment for the licensed rights to operate under an established brand, and to be trained and supported by a central franchisor. The 'marriage' is protected by a Franchise Agreement which provides you with an exclusive territory for a set period of time on a renewable basis. Franchising is one of three business strategies a company may use in capturing market share. The others are company owned units or a combination of company owned and franchised units. Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company's products and services can help them. It is a method for distributing products and services that satisfy customer needs. Franchising is a network of interdependent business relationships that allows a number of people to share: • A brand identification • A successful method of doing business • A proven marketing and distribution system In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors. There are many misconceptions about franchising, but probably the most widely held is that you as a franchisee...
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...Abstract This article provides an overview of the recent literature on franchising, with special attention to management control issues. Based on an analysis of franchising articles published in twenty-five high-impact 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...
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...literature review of a discussion that critically review the different academic opinions related to the issue of franchising. covering as follow; 1. history of franchising 2. definition of franchising 3. concept of franchising 4. PEST of franchising 5. advantages and disadvantages of franchising 6. franchising in the hospitality industry A Very Brief History of Franchising Most of the historians consider that the concept of franchising started in the middle ages, at the time when the feudal aristocrats have started to sell the rights of collecting taxes and operating markets to others on their behalf. This is however indicating franchising as a political activity instead of the business activity. Moreover, according to some historians the very first example of the franchising indicating a method of conducting business is traced back in the mid nineteenth century in Germany where the contact was made with the tavern/bar owners in order to sell beer entirely in taverns. But, in the United States the earliest use of the franchising was not found in the taverns and breweries rather it started with the product selling the housewives that are located on U.S. prairie. However, in 1851, a singer named Isaac became the first U.S. franchisor of the product name when he started to sell the rights to the independent salesman in order to sell the sewing machine to the end users. Though, Singer Sewing Machine was the first U.S. product name or identity franchisor in America...
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...An Introduction to Franchising Franchising * Franchising is a form of business organization in which a firm that already has a SUCCESSFUL product or service (FRANCHISOR) licenses its trademark and method of doing business to another business or individual (FRANCHISEE), in exchange for a franchise fee and ongoing royalty payment * International Franchise Association (IFA): “A franchise operation is a contractual relationship between the franchisor and franchisee in which the franchisor offers or is obliged to maintain a continuing interest in the business of the franchisee in such areas as know-how and training; wherein the franchisee operates under a common trade name, format and/or procedure owned or controlled by the franchisor, and in which the franchisee has or will make a substantial capital investment in his business from his own resources.” * Franchising is MORE than just distributorship because it extends to an ENTIRE operation or method of dong business, involves greater assistance, control and longer duration, whereas the distributor merely re-sells products to retailers or customers Growth of Franchising The word “franchise” comes from an old dialect of French and means privilege or freedom Singer Sewing Machine - first franchise (mid 19th century) Automobile - Ford, Petroleum Products - Shell, Softdrinks - Coca Cola, Food & Restaurants - McDonalds & Starbucks Home markets became saturated, resulting in attractive opportunities overseas...
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...253–268 Franchising Research Frontiers for the Twenty-First Century Rajiv P. Dant a,∗ , Marko Grünhagen b,1 , Josef Windsperger c,2 a Michael F. Price College of Business, The University of Oklahoma, 307 West Brooks, Norman, OK 73019-4001, USA b Eastern Illinois University, School of Business, 4002 Lumpkin Hall, Charleston, IL 61920, USA c Center of Business Studies, University of Vienna, Brünner Strasse 72, A-1210 Vienna, Austria Abstract About four decades ago, during the formative years of the franchising industry, visionary authors like Oxenfeldt and Kelly (1968) and Ozanne and Hunt (1971) proposed a rich slate of research agenda which still continues to guide some of the contemporary scholarship in the franchising domain. This article (1) explicates some of the unique features of the franchising context that presumably inspired these pioneering authors, (2) discusses four established elements of ontology unique to franchising and isolates the remaining research gaps therein, (3) specifies a new slate of more contemporary research agenda for future scholarship, and (4) concludes with a brief discussion of the ten articles featured in this Special Issue of the Journal of Retailing dedicated to the theme of Franchising and Retailing. © 2011 Published by Elsevier Inc on behalf of New York University. Keywords: Franchising Research Agenda; Research Frontiers; Mixed Motives Context; Asymmetrical Power Setting; Twenty-First Century Introduction Modern franchising in USA...
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...About Franchising Franchising is a long-term cooperative relationship between two entities—a franchisor and one or more franchisees—that is based on an agreement in which the franchisor provides a licensed privilege to the franchisee to do business. The franchisor grants the franchisee the right to use a developed concept, including trademarks and brand names, production, service and marketing methods and the entire business operation model, for a fee. The franchisee then provides the time, capital, and desire to utilize the brand and services provided by the franchisor to build a thriving business. The product, method or service being marketed is usually identified by the franchisor's brand name, and the holder of the privilege (franchisee) is often given exclusive access to a defined geographical area for a defined period of time, all of which is defined in the Franchise Agreement. Franchise a privilege or right officially granted to offer specific products or services under explicit guidelines at a certain location for a declared period of time. Franchise Agreement The legal document between the Franchisor and the Franchisee that governs the relationship between the two entities for a specified period of time. It frames the relationship in a concise manner. Franchisee A person or entity to whom the right to conduct a business is granted by the franchisor or licensor. Franchisor the Company owning/controlling the rights to grant franchises to potential franchisees...
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...Franchising - strategy, system, advantages, model, type, company, disad... http://www.referenceforbusiness.com/management/Ex-Gov/Franchising... Reference for Business Encyclopedia of Business, 2nd ed. Reference for Business » Encyclopedia of Business, 2nd ed. » Ex-Gov » Franchising Powered by JRank Search FRANCHISING When an individual has the desire and drive to run their own business but lacks a strong idea for a company, this person may look to franchising in order to be their own boss and run a proven business. Franchising is an agreement or alliance between two organizations—the franchisor and the franchisee. The franchisor has the business model, training materials, and other materials for the business. The franchisee is the entrepreneur who agrees to operate a branch of the business in their location while paying the franchisor various fees and royalties for the use of the business idea or model. TYPES OF FRANCHISING Business-format franchising exists when a franchisor allows someone to market products or service, using the business name or trademark, in return for fess and royalties. When franchising is mentioned, most people think of this businessformat franchising, like McDonald's, AAMCO Transmission, or Molly Maid. There is also product or trademark franchising. This is a limited franchise where a manufacturer may grant another party license to sell goods produced by the manufacturer. This might includes sales of cars through dealerships (e.g....
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...An Introduction to Franchising Sponsored by: IFA EDUCATIONAL FOUNDATION © 2010 The IFA Educational Foundation. All Rights Reserved. No part of this book may be reproduced or transmitted in any form, by any means (electronic, photocopying, recording or otherwise), without the written permission of the publisher. IFA Educational Foundation, 1501 K Street, NW, Washington, DC 20005, (202) 628-8000, www.franchise.org. An Introduction to Franchising IFA EDUCATIONAL 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...
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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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...Chapter 6 Franchising and the Entrepreneur Part 1: Learning Objectives 1. Describe the three types of franchising: trade name, product distribution, and pure. 2. Explain the benefits and the drawbacks of buying a franchise. 3. Understand the laws covering franchise purchases. 4. Discuss the right way to buy a franchise. 5. Outline the major trends shaping franchising. Part 2: Class Instruction Introduction The number of franchises has grown tremendously. The number of U.S. franchises has increased consistently since the 1970s, and the continued growth since the mid–1980s documents that franchises continues to play a significant role in the U.S. and world business economy. Franchising is a business structure comprised of semi–independent business owners (referred to as the franchisees) that pay fees and royalties to a parent company (referred to as the franchiser) in return for the right to be identified with its trademark, to sell its products or services, and often to use its business format and system. As presented in Figure 6.1: The Franchising Relationship on page 196, the connection between the franchiser and the franchisee is a unique and often a highly structured and defined business relationship regarding: • Site selection • Design • Employees • Products and services • Prices • Purchasing • Advertising • Quality control • Support Types of Franchises LO...
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...CHAPTER Franchises and Buyouts What comes to mind when you see the word franchise? For many, it’s a fast-food restaurant. For some, it’s the standardization of America—the same product or service wherever you go. For still others, it is a business model with franchisor rules that must be followed. For Dina Dwyer-Owens, however, it’s a way of teaching “principles and systems of personal and business success so that all people we touch live happier and more successful lives.” Dwyer-Owens is chairwoman and CEO of The Dwyer Group, a holding company of seven service-based franchise organizations: Aire Serv, Glass Doctor, Mr. Appliance, Mr. Electric, Mr. Rooter, Rainbow International, and The Grounds Guys. Founded in 1981 as Rainbow International, The Dwyer Group’s companies were providing services through more than 1,500 franchises in 10 countries by 2012. Don Dwyer, Dwyer-Owens’ father, fit the profile of an entrepreneur. In his youth, he had a newspaper route from which he © CBS Photo Archive/Getty Images In the SPOTLIGHT The Dwyer Group®: Seven Companies, One Code of Values www.dwyergroup.com After studying this chapter, you should be able to… earned over $2 million in today’s dollars by the time he finished college. Later, he bought a motivational materials franchise. His performance so impressed the franchisor that he made Dwyer part of his management team. Dwyer moved on to head Rainbow International, a carpet dyeing and cleaning company...
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...CHAPTER 1: FRANCHISE INDUSTRY KPMG in India carried out a survey of Franchisors and Franchisees to solicit their perspectives on outlook for growth and how overall dynamics between Franchisor and Franchisee community is shaping up. The results of the survey have been broadly categorized under the following heads * Growth drivers for Franchising in India * Franchise Operating Models * Franchisee Satisfaction * Franchisee Support & Relationship Management * Challenges in Franchising * Conflict Management Growth drivers of franchising in India India, with its large population has always been a consumption story and will continue to remain so for the years to come. Burgeoning consumer class with an increasing appetite for consumption is considered as the biggest growth driver, both by franchisors and franchisees. Increase in entrepreneurial drive coupled with risk taking abilities has steered a number of people, especially those with no-specific business background, take a plunge into franchising based business models. Franchising as a business model has achieved stability over the course of time, giving new entrepreneurs increased confidence on the success of their ventures. Besides these, availability of investments and increased investment capability has also been a key factor driving the growth of the industry, especially when investment support from franchisors is minimal. Businessmen predominantly choose franchising...
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...McDonald’s Types of business organisations Link to case study here Overview: a case study of McDonald’s and its relationship with its franchises. Learning objectives: ➢ to analyse the role of franchises and franchisor ➢ to consider the importance of franchisees to the success of McDonald’s. Introduction (30 minutes) Introduce the lesson: you will look at McDonald’s and its relationship with its franchisees. You will consider the advantages and disadvantages of having franchises. The first McDonald’s was opened in 1940 in San Bernadino, California. However, success really began when Ray Kroc became involved in the business. McDonald’s is now extremely successful with over 30,000 restaurants. In 2002 it served over 16 billion customers, to expand rapidly over 70% of McDonald’s restaurants are franchises. Explain what a franchise is ( where McDonald’s sells the rights to use its name , products and systems in return for a percentage of the franchises earnings) Student task: How does brand franchising enable an organisation like McDonald’s to grow? How does brand franchising reduce the risk for the franchisee? Why are franchisees prepared to pay McDonald’s 4.5% of their sales revenue towards national marketing costs? Why does McDonald’s provide ongoing support to franchisees? Students to suggest the benefits of being a franchisee of McDonald’s. (e.g. support, well known brand, established systems, share resources). Put these ideas on the...
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...Business Format Franchising as a Market Entry Method McDonald’s Student Name: Nursulu Student ID: Lecturer: Dr. Lester Massingham/ Dr. Tom Abstract This report is based on the advantages and disadvantages of business format franchising and the fundamentals of market entry methods. Using McDonalds which happens to be one of the largest food service companies in the world, the author of this paper will look into the concepts of various market entry strategies in comparison to business format franchising. This report will also look into various elements that will essentially be needed to be addressed. It will critically discuss the various aspects involved in franchising as a market entry strategy and focus on how business format franchising can assessed as an expansion strategy in contrast to other modes of entry. Contents A Brief Journey into the History of McDonalds 3 1.0 An Introduction to Franchising (Facts about Franchising) 4 2.0 The Advantages and Disadvantages of Business Format Franchising 5 2.1 Marketing Franchises Vs Marketing Standalone Enterprises 7 2.2 Brand Image Transformation – Maintained Brand Equity of Franchises 8 2.2 Franchise Marketing Mix Vs Other Entry Modes 9 3.0 Market Entry Methods 10 3.1 Direct Export & Indirect Exportation 10 3.2 Licensing 11 3.3 Contracting 11 3.4 Manufacturing Abroad 11 3.5 Joint Venture 11 4.0 Conclusions & Recommendations 12 Bibliography 13 List of Figures Figure 1 - Franchise Agreement Elements...
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