Types of Franchising
There are three basic types of franchise; 1. Trade name franchise
Trade name franchise involves a brand name such as True Value Hardware or Western Auto. Here, the franchisee purchases the right to become identified with the franchisers trade name without distributing particular products exclusively under the manufacturers name. 2. Product distribution franchise
A Product distribution franchise licenses the franchisee to sell specific products under the manufacturers brand name and trademark through a selective, limited distribution network. This system is commonly used to market automobiles (Chevrolet, Oldsmobile, Chrysler) gasoline products (Exxon, Sunoco, Texaco), soft drinks (Pepsi Cola,
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With this in mind, let us investigate the specific advantages of franchising to the franchisee.
The Advantages of a Franchise 1. Management Training and Support. The most common cause of business failure is incompetent management. Franchisers are well aware of this, and in an attempt to reduce the number of franchise casualties, they offer managerial training programs to franchisees before opening a new outlet. Many franchisers, especially the well established ones, also provide follow-up training and counseling services. This service is vital, especially because most franchisers do not require a franchisee to have experience in the business.
Training programs vary in their degree of formality and comprehensiveness. Some franchisers rely almost exclusively on manuals and booklets, with very little personal interaction or instruction. Other franchisers provide extensive programs at a company location, using classroom training, discussion groups, simulations, and other techniques to familiarize the franchisee with the basic operation of the business.
The range of topics covered in training programs is quite varied. Standard subjects include store layout and design, equipment purchasing and operation, insurance needs, inventory control,
A franchise is a legal agreement between franchisers and franchisees that consents use of the franchise’s trademark and trade name or marketing plan
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
When restaurants not do franchise they maintain uniformity in service and quality which can be monitored and evaluated by Corporate using the same standards. The rigidity will ensure consistency for the chain. There are some monitoring costs that emerge when a company decides to franchise its operations. These monitoring costs are costs involved with making sure that employees at the franchisee work hard and follow the rules. This requires hiring supervisors who will monitor the employees, but somebody needs to monitor the supervisors and so forth.
The franchiser can attain rapid growth for the chain by sign- ing up many franchisees in many different locations.
You pay a franchise fee and you get a format or system developed by the company (franchisor), the right to use the franchisor’s name for a limited time, and assistance. For example, the franchisor may provide you with help in finding a location for your outlet; initial training and an operating manual; and advice on management, marketing, or personnel. The franchisor may provide support through periodic newsletters, a toll-free telephone number, a website, or scheduled workshops or seminars.
As I frequent the restaurant I have seen first-hand that the management would need an over haul if franchises were ever to be a possibility. Managers at different locations do things differently. An example is the way their subs are made. At one location, onions and tomatoes are put on the Italian sub at another location, these items are not a usual topping, so you must ask for them. There are some difference that would need to more uniform. I understand franchises have their own personal touches to products however the product should have more universal likeness as it is the same
The significance of strengthening and developing each individual store is huge, because this is crucial for the company as a whole and it derive its future.
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
A good franchise offer training and support as owner will not know how to run Jiffy Lube or Subway without guidance. Franchisor have advantage from buying power and efficiency due to large scale of franchise so they can negotiate lower prices for the products and services needed to run business. The startup cost can have a wide range depending on the franchise, therefore most franchise have financial loan program (Geoff, 2013).
It has its advantages and disadvantages to franchise the business. It is a careful decision to make for anyone to invest a lot of money into a franchise and everyone should be comparing pros and cons.
Structured and programmed training venues are designed to equip the employee, supervisor, and manager with the knowledge, skills, and abilities needed to startup, maintain, and improve services and products provided to general public on a global scale. Formal training is generally the focus of most organizations when discussing the return on investment in the form of revenue generation or in the case of governments, efficiency in utilizing citizens taxes in a responsible manner.
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
Not having to answer to a corporate boss is the dream of many and the flexibility that owning a business franchise creates provides this option. Success is not reached by simply creating a business, however. The level of success is measured by the size and efficiency of the business. Business growth is the driving force of the economy. The additional jobs and revenues created when a business expands allow the economy to grow at exponential rates. One of the fastest and most popular ways to increase the size of a business is to turn it into a franchise, which can then be purchased by individuals. Franchising provides opportunities that are beneficial to both the parent company and the purchaser. The company that owns the business can expand
Employee training programs are important in a business' success. Without an effective training program implemented the business could suffer from confused employees, ill direction and incompetence. The new employee can only excel further when taken through a properly planned training program.
‘As a result, expansion can proceed at a much faster pace than would otherwise be possible, enabling the franchisor to achieve increased market share whilst benefiting from economies of scale.’ (http://www.butterfield.co.za) Finally, franchisors can benefit from the cultural knowledge and know-how of local managers. This can be helpful in lowering the risk of business failure in unfamiliar markets, as well as creating a competitive advantage. Franchising offers franchisees the advantage of starting up a new business quickly based on a proven trademark and way of doing business, as opposed to building a new business from scratch. The franchised business is based on a proven idea and has an existing customer base, therefore making it much easier to sell your product than it would if you were to start up your own business.