...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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...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 ...
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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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...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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...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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...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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...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 profit maximizing price while the retailer treats the wholesale price as marginal cost and marks it up a second time. To address this type of problem the wholesaler can choose from a variety of remedies such as retail price maintenance (RPM), minimum quantity order, or two-part tariff. However...
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...academic and professional contributions are necessary for guiding business practices. Due to this reasons, the franchise systems were created as a mode of expanding businesses. Most of business minded people were selecting the franchising business as their way to expand their profits as well as their wealth. The concrete reason why they were selecting this kind of business is due to systematic management and cash flow which is provided by the franchisors. However, in these competitive markets, they still have their own weaknesses and might affecting failure of the franchising business itself. The weakness is depends in various aspects including surrounding cultures, afford abilities of the consumers, and etc. Therefore, the franchisors need to do a certain research in order to prevent their business from getting collapsed due to their own weaknesses and any surrounding problems. The remainder of this paper is structured as follows. Section A is regarding demographic, geographic and psychographic of the respondents involved throughout the research. Section B is examines the factors which causing the failure of franchising business in Malaysia. And on the last section examines the strategies which can be taken in order to improve franchising business in Malaysia. 1.1 Problem Statement. Recently, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob, from his speech which is published on 31st March 2010 in Business Times, attribute...
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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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...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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...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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...Research topic: Factors impact on the development of franchising in Vietnam. I. Introduction: 1. Problem statement: Nowadays, franchising is very popular all over the world. In Vietnam, it is not a strange type of business. Observers note that Vietnam currently has major advantages for franchise development. First, the economy has been growing steadily at 7-8 percent in recent years. Second, a young population of 83 million people is seeing living standards rise as disposable income increases. Franchising begins in Vietnam in 2000 with Trung Nguyen coffee as a pioneer, then gradually becomes popular since 2003 until now. Viet Nam now has over 70 separate franchising operations, marketing both local and overseas brands. Some famous franchisors in Vietnam after Trung Nguyen Coffee are Pho 24, which has outlets in Singapore, China and Japan; Kinh Do Bakery, owned by the large bakery; and Bon Mua (Four Seasons) Food and Drink restaurants, owned by leading Vietnamese retailer Hapro. Franchising brings benefits for both franchisee and franchisor. For franchisors, it is a good opportunity to spread their brand name in Vietnam market and overseas markets, increase turnover, save management expenses, protect and broadcast their brand name. For franchisees, they can reduce risks in business because everything is established by franchisor, franchisees will be received training, development and impart management skills, how to decorate the system as per the franchisor’s...
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...as, bureaucratic control, market control and clan control are put to use daily. With any type of control mechanism there are positive and negative aspects to each. Let us look at the positive and negative reactions to control mechanisms within the Starbucks organization starting with bureaucratic control. The use of bureaucratic control for Starbucks is implemented and managed on the executive level. At this level, bureaucratic control is used by management to control employee behavior through a system of rewards and formal procedures. One way Starbucks implements its formal procedures is through the control of franchising. Howard Schultz the owner and creator of Starbucks is quoted on franchising by stating, “Starbucks remain steadfastly opposed to franchising, so that the company could control the quality of its products and build a culture common to all stores”(MHHE). Starbucks uses bureaucratic control positively by maintaining control over its product and location sites. Negatively this can impact bureaucratic control when it comes to franchising. Unlike Starbucks, McDonalds encourages franchising. It is through the independent owners of McDonald’s franchises that creative and new products are made and added to the companies menu. Many ideas for new items on the menu come from the franchisees responding to customer demand (MCDONALDS.CO.UK) Market control is another type of control mechanism used by the Starbucks organization. Market control is unique in of...
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...In the last 20 years, a significant amount of research on franchising has been conducted in various disciplines, including economics, law, management, marketing, and management science. A major goal of this article is to provide a comprehensive overview of the existing literature. A second goal of this article is to enumerate steps that can be taken to improve both the rigor and relevance of franchising research. Since this represents an initial overview of a very broad research field, we have not attempted to develop a tightly focused research agenda on any one topic. Instead we present several relatively general, widely applicable suggestions that can significantly improve future research. We first split existing research into three categories and provide reasons for this split. Each of the categories is then reviewed, and suggestions are offered to improve research. Finally, methodologies for franchising research are discussed. Franchising sales of goods and services in the U.S. are estimated at $758 billion (U.S. Department of Census 1994), with further expansion expected (Hoffman and Preble 1991). There are 2,177 franchisors with 542,000 units (U.S. Department of Census 1994); 374 U.S. franchisors operate about 35,000 franchised units abroad, 75 percent of which are in Canada, Japan, Western Europe, and Australia (U.S. Department of Commerce 1988; U.S. Department of Census 1994). Franchising is an important means of doing business for many entrepreneurs. It is suited...
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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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