Upload
juliet-short
View
226
Download
3
Tags:
Embed Size (px)
Citation preview
Definition:
A form of business organization in which a firm, which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisee) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee.
Two Parties :
FranchiseeAn entrepreneur whose power is limited by a contractual
agreement with a franchisor
FranchisorThe party in the franchise contract that specifies the
methods to be followed and the terms to be met by the other party
Authority and Control..
Control is with the parental company (Franchisor).
The Franchisor have the Authority to cancel the contract of a franchisee whenever they want.
Growth of Franchising
Franchising originated afterthe First World War withthe development of petrol stations and motor vehicledealerships. Today there are many examples of franchising, and it is particularly prominent in the food, service and retail industries.
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. McDonald’s,
Starbucks)
Reasons for franchising …..
Home markets saturated – attractive opportunities overseas
Relaxation of regulations in most countries
Expansion of international tradeExposure to international media
The 20 Fastest-Growing Franchises -
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. Circle K: Convenience store
9. Papa John’s Intl: Pizza
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. Arby’s: Sandwiches
19. Jan-Pro: Commercial cleaning
20. Taco Bell: Quick-service Mexican
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 - $50,405
Kumon Math Centers Supplemental education $32,958 - $131,070
Stratus 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
Vanguard Cleaning Commercial cleaning $8,125 - $38,100
ServiceMaster Clean Disaster cleaning $20,926 - $132,623
Bonus Building Care Commercial cleaning $9,000 - $15,000
Merry Maids Residential cleaning $24,750 - $59,450
Anago Cleaning Systems Commercial cleaning $8,543 -$55,306
Categories of Franchising
Four main categories:
Product and trade name franchises
Manufacturing and production franchises Business format or system
franchises Management franchising
1.Product and trade name Franchises
Product and trade name franchises are arrangements where franchisees are granted the right to distribute a manufacturer's product within a specified territory or at a particular location, using the manufacturer's trade mark or trade name, in exchange for fees or royalties. Petrol stations are a prime example of this.
2.Manufacturing and production Franchises
A process or manufacturing franchise is an arrangement where a franchisor provides an essential ingredient or know-how to a processor or manufacturer. Franchises of this nature are common, for instance, in the soft-drink industry.
2.Manufacturing and production franchises
Example: Produces the syrup
Sells the syrup
FRANCHISEE Produces the final drink
Retail Stores
Restaurants & F&B Outlets
Vending Machine
Operators
3.Business format or system Franchises
Business format or system franchises add an extra layer, including a business plan, management system, location, appearance, image, and quality of goods and services.
4.Management Franchising
A form of service agreement.
The franchisor provides the management expertise, format and procedure for conducting the business.
An Attractive Franchise Opportunity 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 be easily replicated.
A product or service that can be successful in many different geographic regions.
Advantages of franchising
The Franchisor: Less capital required Rapid expansion Retaining control Dedicated owner operators Benchmarking
The Franchisee: A proven system Start up assistance Ongoing assistance Joint advertising Easier to obtain finance
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