Franchising by Luqman, Omer n Shueb

8/2/2019 Franchising by Luqman, Omer n Shueb

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Franchising

Luqman Hakeem

Omer Iftikhar

Shoaib Anwer


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Definition:

A form of business organization in which afirm, which already has a successfulproduct or service (the franchisor) entersinto a continuing contractual relationshipwith other businesses (franchisee)operating under the franchisor's trade

name and usually with the franchisor'sguidance, in exchange for a fee.


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Two Parties :

Franchisee

An entrepreneur whose power is limited by a contractualagreement with a franchisor

Franchisor

The party in the franchise contract that specifies themethods to be followed and the terms to be met by theother party


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Authority and Control..

Control is with the parental company(Franchisor).

The Franchisor have the Authority tocancel the contract of a franchiseewhenever they want.


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Growth of Franchising

Franchising originated after

the First World War with

the development of petrol

stations and motor vehicle

dealerships. Today there

are many examples of franchising,

and it is particularly prominent in the

food, service and retail industries.


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Continued

Singer Sewing Machine first franchise(mid-19th century)

Automobile (e.g. Ford)

Petroleum products (e.g. Shell)

Soft drinks (e.g. Coca Cola)

Food and restaurants (e.g. McDonalds,Starbucks)


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Some Factors..

Home markets saturated attractiveopportunities overseas

Relaxation of regulations in most countries

Expansion of international trade

Exposure to international media


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The 20 Fastest-Growing Franchises -2009

1. Subway: Submarine sandwiches & salads

2. McDonalds: Hamburgers, chicken, salads

3. Liberty Tax Service: Income-tax preparation

4. Sonic Drive-In Restaurants: USA (44 franchises)

5. Inter Continental Hotels:

6. Ace Hardware:Home improvement store

7. Pizza Hut: Pizza, pasta, wings

8. UPS Store/Mail Boxes Etc:

9. Circle K: Convenience store

10. Papa Johns Intl: Pizza


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11. Jiffy Lube Intl: Fast oil change

12. Instant Tax Service:

13. Baskin-Robbins USA: Ice cream

14. KFC Corp: Chicken

15. Jani-King: Commercial cleaning

16. Dairy Queen:

17. Super 8: Hotels

18. Arbys: Sandwiches

19. Jan-Pro: Commercial cleaning

20. Taco Bell: Quick-service Mexican


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Top 12 Low-Cost Franchises -2010

H & R Block Tax preparation and electronic filing$26,427 - $84,094

Jani-King Commercial cleaning $11,400 - $35,050

Jan-Pro Intl Commercial cleaning $3,145 - $50,405Kumon Math Centers Supplemental education $32,958 - $131,070Stratus Building Solutions Commercial cleaning $3,450 -$57,750 Jazzercise Inc Dance fitness classes $2,980 - $75,500 Instant Tax Service Retail tax preparation $39,000 - $89,000


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Vanguard Cleaning Commercial cleaning $8,125 - $38,100ServiceMaster Clean Disaster cleaning $20,926 - $132,623Bonus Building Care Commercial cleaning $9,000 - $15,000Merry Maids Residential cleaning $24,750 - $59,450Anago Cleaning Systems Commercial cleaning $8,543 -$55,306


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Categories of Franchising

Four main categories:

Product and trade name franchises

Manufacturing and production franchises

Business format or system franchises

Management franchising


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1.Product and trade nameFranchises

Product and trade name franchises arearrangements where franchisees are granted theright to distribute a manufacturer's product withina specified territory or at a particular location,using the manufacturer's trade mark or trade

name, in exchange for fees or royalties. Petrolstations are a prime example of this.


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2.Manufacturing andproduction Franchises

A process or manufacturing franchise is anarrangement where a franchisor providesan essential ingredient or know-how to aprocessor or manufacturer. Franchises ofthis nature are common, for instance, in

the soft-drink industry.


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Examples of famous Manufacturing and

production franchises


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2.Manufacturing and productionfranchises

Example:Produces the syrup

Sells the syrup

FRANCHISEE Produces the finaldrink

Retail Stores

Restaurants &F&B Outlets

VendingMachine

Operators


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3.Business format or system

Franchises

Business format or system franchises addan extra layer, including a business plan,management system, location,appearance, image, and quality of goodsand services.


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Famous Examples


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3.BUSINESS FORMATFRANCHISING

outlet in

Sale, Australia

outlet in

Marseille, France


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4.Management Franchising

A form of service agreement.

The franchisor provides the managementexpertise, format and procedure forconducting the business.


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Famous Examples


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An Attractive FranchiseOpportunity Includes: Registered trademarks

Successful prototype stores with a track record of

profitability and a positive reputation

A business that can be systematized so that it can beeasily replicated.

A product or service that can be successful in manydifferent geographic regions.


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Advantages of franchising

The Franchisor: Less capital required

Rapid expansion

Retaining control

Dedicated owner operators

Benchmarking


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The Franchisee: A proven system

Start up assistance

Ongoing assistance

Joint advertising

Easier to obtain finance


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Disadvantages of Franchising

The Franchisor: High operating cost

Reduced income per unit

Poor franchisee selection

The Franchisee:

Bad decisions by the Franchisor Restrictions on the sale of the business

Restrictions on expansion/growth


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Franchising is more thandistributorship

Extends to an entire operation or method ofbusiness

Greater assistance, control and longer duration

Distributor merely re-sells products to retailersor customers

Documents

Franchising by Luqman, Omer n Shueb