INTRODUCTION
The idea of franchising has been a thought that dates all the way back to the middle ages when landowners would grant peasants to hunt, hold fairs, and hold markets on their land. It was not until 1858 that franchising became an important industry. Today, franchising is still one of the largest industries in existence (“The History Of Franchising,” n.d.). Franchising is an agreement between a party (Franchisor) who gives the privilege to another individual (Franchisee) to own, manage, and run his or her business in another place with certain expenses that the franchisee is responsible for and laws that the franchisee must abide by.
Over the years, franchising has become very important to the economy. When franchising is done
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The franchisor has the power to reject or accept anyone who wants to franchise his or her business. Franchisors only accept a franchisee after the candidate passes certain company requirements that show the franchisor that the candidate is serious about upholding the expectations for the franchise that the franchisor has set in place. A consulting company (Reliable Background Screening) towards franchisors, gives advice to franchisors and say, “By thoughtful and careful analysis, you improve your odds of choosing the best franchisee owners to represent and promote your franchise company 's image and values. (“Background Checks to Protect Your Franchise Brand,”n.d.). Franchisors have to make the right choice when it comes to picking their franchisee because in the future they will be the one representing their company. If in the future the franchisee and franchisor are not seeing eye to eye it can open up conflicts which can ultimately hurt their brand.
The Importance of the Franchisor
Franchising is quite different than other industries because two entrepreneurs are involved in it and their relationship is vital for success. The franchisee needs the right tools, guidance, and a respectable amount of money in order for him or her to generate the appropriate profits to make the franchise worth the investment. However, franchisors must also be ready to assist their franchisees with all of the tools and guidance they need to make them successful. Mark Siebert the CEO of
1. Franchisees gain numerous advantage when they purchase a franchise. First, while a franchisee may be opening a new store, it is part of an already established business and system. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. Franchisees also get support for management and training activities, as well as financial assistance. Going hand in hand with this, a franchise already has an established brand name, quality of goods and service which have been standardized across the franchisor’s larger company, and national advertising programs from franchisors. Franchises also have large-volume, centralized buying power. A franchise has proven products, and
Franchising is simply treated as for expanding a business and distributing goods and services through a contract based relationship. In franchising, franchisors [whose business is handed over to a third party to manage, and with its trademark] not only specify the products and services that will be provided by the franchisees [a person or company who is given authority to do business under the trademark and trade name by the franchisor], but also provide them with an operating system, brand and support.
The first choice of business is the franchise. In a franchise, legal binding agreement is entered into between two firms, the franchisor (the product or service owner) and the franchisee (the firm to market the product or service in a particular location). The franchisee pays a certain sum of money for the right to market this product” (Rubin, 1978, p.224). The franchising is more prevalent in the restaurant industry (Hoffman & Preble, 2003). The two distinct features of this business type include; first, in order to notable service components should
Franchising is a business model that allows companies to rapidly expand their market share. According to Franchise.com (2015), there are three types of franchises: distributorships, trademark licensing, and business format franchises. When two organizations enter into a distributorship, the originating company provides the rights another company to sell their products. An example of a distributorship is when an auto manufacturing company grants rights to a dealership to sell their vehicles (Franchise.com, 2015). Trademark licensing is when one company allows another company to use their trademark (Franchise.com, 2015). The business format franchise authorizes franchisees to sell the parent company’s products and/or services as well as utilize their business model. This type of franchising is the most common and is the type needed to obtain to open a new Cold Stone Creamery.
Franchising acquired its popularity by establishing a common method of service which gave customers the comfort that they look for when they look for a meal.When the customers go out
• Franchisee selection is a fundamental factor that would most likely need to be re-evaluated to determine if the current criteria structure is deemed too extravagant when comparing to other restaurant chains of the same calibre. These guidelines need to be improved to attract entrepreneurs.
Introduction Opening up a business such as a franchise can carry many risks, both financially and personally but can also be very rewarding and challenging. Some people make a decent living, some end up rich, then again, plenty of people fail. (MSNMoney, 2014) There are many advantages of owning a franchise. Some advantages are that you have association with a well-established brand, reputation and product or service, access to established standard procedures, operating manuals and stock control systems.
Franchising is defined as “a commercial agreement between a party that owns a trade name or trademark (the franchisor) and party that sells or distributes goods or services using that trade name or trademark (the franchisee) (Kubasek et al., 2015, p. 431). There are key advantages for choosing a franchise when starting a new business. First, there is many times instant brand awareness that is identifiable by potential customers, which you as a new owner do not have to concentrate on building. Secondly, on-going marketing of your business is backed by the power of the established brand, and could be as simple as contributing a fee to a advertising fund that is driven by the franchisor. Thirdly, the Return on Investment (ROI) will most likely be faster as the customers are “ready-made” and eager to buy your product or service. Fourthly, the franchise model provides a built-in support model, both from the franchisor and from other franchisees throughout the region and nation. Lastly, the franchise will provide consistent and extensive training in every aspect of the business (Goldberg, 2015).
This Literature review explains if a franchise is high or low risk way of entering into a market. It also explains whether a franchisee is suited for a certain franchise. Franchises can be seen all over the world, with everyone being introduced to them, as consumers, from a young age (Longenecker et al., 2011). Thomas and Seid (2000) agree with this and believes due to it, people think they understand a lot more about a franchise than they actually do, creating myths about the rate of success and the ease of entry. Antitrust Law and Economics of Product Distribution (2006, p.5) defines a franchise in a 3 part way as, “(1) a franchisee (a) offers, sells or distributes a franchisor’s goods or services, which are identified by
Small businesses are essential to the fabric of the American economy. Specifically the franchise model offers an easy way for an entrepreneur to attain success in the increasingly difficult and murky economical landscape. The U.S. Census Bureau estimates that over 13% of the total American workforce is compromised of franchisee employees. That equates to roughly 7.9 million workers. And while many have found unbound success within the realms of franchising, there are risks specific to undertaking such an expenditure.
Franchising is a well-known business and commerce procedure that brings together the title-holder of recognized merchandise with another business or products. This system is readily used by small businesses and companies to provide as a mean to provide authentication and support for their business by having a brand name of a well-known company associated with it. However like most business entry strategies franchising to has some
The Advantages and Disadvantages of Franchising in France 1 Running head: International Trade: Licensing and Franchising The Advantages and Disadvantages of Franchising in France Presented by: Deon E. Boswell Of Team McWorld University of Maryland University College AMBA606 November 4, 2005 The Advantages and Disadvantages of Franchising in France 2 Executive Summary The tremendous growth in franchising over the last decade can be traced directly to the explosion of growth in international trade and globalization. As organizations, attempt to enter new markets they are finding that direct investment via subsidiary creation is an expensive proposition and that their capital expenditures could be used for other opportunities
Franchisors are increasingly having to be more and more selective in the adoption of franchisees with factors such as economic climate and the potential difficulty with growth playing key factors in the decision making process. It is not simply an ability to grow which creates a successful Franchise and nor is it the desire of any franchisor to adopt every potential franchisee. Franchisors are becoming more and more scrutinising as the global economy declines. There is a general understanding within any franchised
McDonald’s has extremely strict rules when it comes to awarding franchises. First, it is very costly to open a new location or purchase an existing location, with the median startup cost being $300,000 (Kalnins & Lafontaine, 2004, p. 750). As well, the company does an extensive background check on a variety of issues including credit history, business management experience, and the acceptance of the contractual agreement that the company provides. Because of these strict rules and the large amount of capital needed to purchase a location, “rates for franchise applicants are 1% for McDonald's” (Norton, 1988, p. 204). This is an extremely low acceptance rate and is even lower than McDonald’s chief competitor, Burger King, who accepts 1.5% percent of applicants (Norton, 1988, p. 199). These low numbers are understandable in the context of the business and risk that is involved. Though the franchise purchaser must pay a large amount of money to gain the rights to the restaurant, they truly have nothing to lose besides money because they are simply running another company’s business model as well as using their trademarks and logos. McDonald’s on the other hand, has a great amount at stake because they place the well being of an entire restaurant into the caretaking of an individual who simply purchased the rights for the store. If the store does poorly or if there are issues with customer service, it reflects
The first section examines the definition of franchising by giving an overview of franchising from an international perspective. The historical section traces this form of business ownership from its beginnings in the Middle Ages to the current trend in international expansion. The