Franchising

3337 Words Feb 27th, 2015 14 Pages
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
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It has been seen as the most widely utilised mode of entry towards rapid international expansion and is primarily employed by fast food chains such as KFC, Wendy’s, Kenny Rogers, A & W and McDonald’s among others followed by consumer service businesses such as hotel chains and car rental, agencies such as Avis and Hertz. Franchises are basically ongoing business relationships which involves 2 components (the franchisor and the franchisee). The franchisor (the owners of the business format) issues a licence through an agreement which allows the franchisee the right or privilege to distribute the goods and services that represents the franchisor’s brand and business system for an agreed sum (royalty or fee) (Doole & Lowe, 2008). In other words, franchising allows the rapid growth or market expansion using a proven business format (intellectual property of the franchisor) it also allows the assistance in the form of capital as well as the fervour of a group of network operators that enhance the market positioning of the franchisee which would not be possible for a new business without huge capitals (Dugan, 1998).
The basics of franchising involve the following elements which are most commonly found in most franchise agreements. These factors are common, but not compulsory as it depends on the mutual understanding between the franchisor and the franchisee.
Franchise Agreement Elements

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