...INTRODUCTION Franchising is the practice of the right to use a firm's business model and brand for a prescribed period of time. It is an authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities. India’s franchising industry is expected to quadruple in volume in the next five years, accounting for almost 4% of India’s gross domestic product (GDP) in 2017, according to a report by KPMG India Pvt. Ltd released on 31st December,2015.The industry was worth $13.4 billion in 2012, contributing 1.4% of GDP, the report said. That compares with almost 10-25% of GDP in most OECD (Organization for Economic Co-operation and Development) countries .The industry is projected to provide almost 11 million employment opportunities by 2017.Retail, food and beverages, health and wellness, consumer services, and education are predicted to be the key sectors for franchise opportunities. While the organized retail segment in India is estimated to be worth $24 billion, only 2.5% of total retail sales are driven through franchise formats compared with nearly 50% in the US, indicating significant potential, the KPMG report said. “Franchising is critical for retailers to achieve exponential growth. Given the threat of mom-and-pop stores closing, both due to the changing external environment and the rising aspirations of the second generation, there is huge potential for franchise growth in the retail sector,” said associate director...
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...franchise contracts tend to be idiosyncratic in nature thereby attracting a great deal of interest by academics and business analysts in recent years. Various explanations have been proposed for the widespread use of franchise contracts in certain industries. While a great deal of the franchise contract has been explained in the literature, there remains certain aspects of this form of arrangement that has yet to be addressed. This paper intends to address two of these issues as well as proposing an alternative modelling approach to franchise contracts. The second section of this paper describes the basic structure of franchise con- tracts. The third section discusses the various explanations that have been proposed to explain franchising. The fourth section sets two aspects of the franchise contract that has not been addressed in the literature. The rst of these is existence of both corporate owned outlets and franchised outlets within the same organization. Some authors have predicted that one form or the other would come to dominate the or-...
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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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...Doikov Contents Introduction 3 Advantages of Franchising 4 Disadvantages of Franchising 5 Top 10 franchise ranking 5 Pasta Italia Background 6 Product Design 7 Service design 9 Capacity management 11 Layout planning 13 Location 15 Conclusion 16 Bibliography: 17 Introduction The aim of this coursework is to represent the role of a supportive project written by an operations management consultant with the Pasta Italia, chain of restaurant which is selling franchise shops to small business owners. Our purpose is to help prospective franchise owners to run their own business and to provide high and unchanging standards of food and service to perpetuate and to save the brand image. The coursework should be made up of five sections: 1. Product design 2. Service design 3. Capacity management 4. Layout planning 5. Location criteria We will continue the project whit explaining what is franchising, which will be followed by an explanation of every other topic mentioned above and some background of the company. Every theme will preface the topic in the context of the restaurant franchise industry and clarifies how theory can be applied in practice by offering examples and diagrams and charts supporting the explanation. When starting a new business there are a lot of pros and cons of doing that. It is proven that franchising is a safety method. What is franchising? Franchising is an agreement between two...
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...In today’s uncertainty economic climate, UK’s economy’s growth in long period has stopped and has been in recession since July 2008. This was caused by key global problems such as rising in commodity prices, house price bubbles, volatility in financial markets and of course the credit crunch. These give a great impact on the business sector. Reduction orders or demands have led to closure of many companies across all sectors. Small businesses are struggling to access the capital needed to stay open, pay debts, maintain payroll and expand operations. The problem is worse for those looking to get into business for themselves for the first time. The Federation of Small Business indicated that about 280 small companies are going out of business every week during this current economic downturn. Why do we need to recover the small business sector? Small and medium enterprise or SME play a vital role in the economy, providing new ideas, products, services and jobs. The UK’s 3.7 million SMEs account for approximately 40% of UK’s gross domestic product or GDP and have an annual turnover of one trillion pounds. Giving jobs over 12 million people in the UK, they also account for 85% of the 2.3 million extra jobs created by new businesses in the private sector between 1995-1999 and more than half of the 3.5 million jobs gained from expansion over the same period. International Franchise Association mentioned that small businesses offer the best opportunity to promote a strong economic...
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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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...International Marketing Management Using 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 ...
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...ENTREPRENEURSHIP 4B LIST OF COMPANIES AVAILABLE FOR FRANCHISING In 1927, a company in Texas called Southland Ice Company pioneered the convenience store concept wherein they sold bread, eggs, and milk even after store hours. In 1946, the company changed its name to 7-Eleven which reflected then the operating hours from 7AM to 11PM. In 1982, Philippine Seven Corporation (PSC), acquired the license for 7-Eleven in the Philippines. In 1998, PSC opened its stores for franchise. In 2000, PSC partnered with a Taiwanese company for expansion plans. In 2010, PSC also partnered with Chevron Philippines (Caltex) to convert their Mini Mart to 7-Eleven stores. In 2012, PSC launched the Store of the Future design and started its expansion to Visayas, particularly in Cebu. Franchise Fee P600,000 (will increase to P1,000,000 within the year) Total Franchise Cost / Investment P3 million and above The company started in 1949 under Pacific Insular Co. – a German importer and wholesaler of medicine. In 1959, Mr. Liuson’s parents bought the company. He took over in 1974. Seeing the need for affordable medicine, he decided to focus on generic medicine wholesale at lower margin in 1983. The company ventured into retail in 2001, maintaining only 1 branch in QC, but then already serving customers as far as Batangas. As demand grew, the company decided to increase accessibility of quality and affordable generics through franchising in the year 2007. TGP opened its first franchise outlet...
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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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...Chapter II Discussions Franchising is a long-term cooperative relationship between two entities—a franchisor (owner) and one or more franchisees (dealer)—that is based on a franchise 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 immediate brand names, well-established tried and tested production, services and marketing methods and the entire business operation model (standard building design and décor, detailed techniques in running and promoting the business, training of employees, and (6) on-going help in promoting and upgrading of the products), for a fee. Successful entrepreneurs often wonder if they should go into a franchising for business expansion. Like any business model, franchising has its benefits and drawbacks. You’ll not know if franchising is right for you until you evaluate its pros and cons. You’ll need a franchisor attorney or consultant to do that but before talking to the experts you should get a sense of the key advantages and disadvantages. There are 3 common benefits you can get if you’ll engage in franchising: 1. Association with a well-established brand, reputation and services With a one-shot payment of initial fee, you can have ready-immediate-wide-spread name recognition where people already have commitment to your franchised-products for it has already a good reputation to the community...
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...Types of Franchising There are three basic types of franchise; 1. Trade name franchise Trade name franchise involves a brand name such as True Value Hardware or Western Auto. Here, the franchisee purchases the right to become identified with the franchisers trade name without distributing particular products exclusively under the manufacturers name. 2. Product distribution franchise A Product distribution franchise licenses the franchisee to sell specific products under the manufacturers brand name and trademark through a selective, limited distribution network. This system is commonly used to market automobiles (Chevrolet, Oldsmobile, Chrysler) gasoline products (Exxon, Sunoco, Texaco), soft drinks (Pepsi Cola, Coca-Cola), bicycles (Schwimm), appliances, cosmetics, and other products. These two distribution systems allow franchisees to acquire some of the parent companys identity. Franchisees concentrate on the franchisers product line, although not necessarily exclusively. Since 1972, the number of product and trade name franchises has declined rapidly because of intense competition and general economic conditions. But the sales of these two franchise systems have climbed steadily since 1972. 3. Pure franchise A Pure (or comprehensive or business format) franchise provides the franchisee with a complete business format, including a license for a trade name, the products or services to be sold, the physical plant, the methods of operation, a marketing...
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...International franchising is often regarded as a low-risk foreign market entry strategy. Does this view fully reflect the attraction of international franchising as a market entry mode? International trade is booming and the world is shrinking rapidly due to faster communication, transportation, and financial flows. Today’s business environment is undergoing fundermental transformation as a result of globalization (Kotler & Armstrong, 2001). According to Hodgetts and Luthans (2003), “globalization is the production and distribution of products and services of a homogenous type and quality on a worldwide basis”. According to Root(1994, P.2) the new global economy has created business environment that require companies to look past the traditional thinking of the domestic market, and start looking at business from an international perspective. The main challenge of global companies is to develop managers that are capable of working across cultures and who are competent in international business (Brake, et al. 1995, p. 2). According to Elashmawi (2000), companies that want to react effectively to changes in its global marketplace, has to have a flexible and adoptable corporate culture. Want (2003) explain corporate culture as the collective belief system that people within a company has about their ability to compete in the marketplace. According to Hoffman and Preble (2004), franchising is a well working theory that helps companies adapt to different cultures and business...
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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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...McDonald’s Franchising McDonald's was first started in 1940 by two brothers named Mac and Dick McDonald in California. As of 2008, it continues to be a worldwide hit in more than 119 different countries and 30,000 different restaurants (McDonald’s.com, 2008). International franchising is a special form of licensing which allows a firm in another country to be given the rights by the firm in the original country (Griffin, Pustay, 2013). It allows the firm to be able to use the same operating systems, logos, trademarks, and brand names in exchange for a royalty payment (Griffin, Pustay, 2013). In this essay I will be talking about McDonald's, which franchises its restaurants all around the globe. McDonald's as a company considers itself to be a brand franchisor. If someone wishes to buy or purchase a restaurant, they brand the goods to the individual and the store (McDonald’s.com, 2008). McDonald's owns the right to own or lease any site and restaurant building to anyone who can afford it. The franchisee that purchases the rights has it for 20 years from McDonald's. They are also responsible for all the equipment and store fittings (McDonald's.com, 2008). The franchisee must comply with the standards that McDonald's has. That means the layout; brand, menus, design and administration of that restaurant must all fall within the standards. Each McDonald's must have the same type of menus and operating systems through its licensing agreement (McDonald’s.com, 2008). Now each menu...
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...Development Franchising as a Social Innovation: When Entrepreneurial Expertise is Lacking Isaac H. Smith David Eccles School of Business University of Utah Kristie K. Seawright Marriott School of Management Brigham Young University Contact: Isaac H. Smith; isaac.smith@business.utah.edu; (T) 801-518-2991; 1645 East Campus Center Drive, 22 KDGB, Salt Lake City, UT 84112 Promoting entrepreneurship in “developing” nations has become a popular strategy for alleviating poverty and stimulating economic development (Khandker, 2005). For example, the worldwide proliferation of microfinance institutions is based on the assumption that providing individuals with better access to financial capital will fuel entrepreneurship and microenterprises, providing opportunities for people to work their way out of poverty. The results of such efforts, however, have been mixed (Snow & Buss, 2001), in part, because not all microfinance borrowers have the entrepreneurial skills sufficient to make a microenterprise succeed (Karnani, 2007a). Cross culturally, successful entrepreneurs have been shown to possess a different set of knowledge structures, or mental schema, than non-entrepreneurs (Mitchell, Smith, Seawright, & Morse, 2000). Interestingly, franchisees—often considered to be entrepreneurs (e.g., Baucus, Baucus, & Human 1996; Grunhagen & Mettelstadedt, 2005)—have been found to have entrepreneurship-related knowledge structures more closely resembling non-entrepreneurs than entrepreneurs...
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