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.
When buying into the company you sign a contract to firstly “buy” into the company, and then you have to pay royalties and a certain percentage of your earnings back to the head company. A positive of franchise agreements is that it allows companies to enter into the foreign market place with out having to put too much money into it. For example, 7- elevens in Australia are all franchises, the fist few franchises in Australia would have been set up as an experiment to see whether the Australian public would embrace the new chain store. The feedback would have been that Australia was pro 7-eleven and now you can walk through the city without seeing one on every corner. Another positive of selling your company as a franchise is that you can earn royalties. Different franchises have different royalty schemes, many expect you to pay a certain fee for the “name” each year and then pay them a percentage of the earnings. 7-eleven was taking 51 cents of every dollar made. This allows the head office to make money on the side while not having to invest more money into a situation where it could
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
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
There is legal framework in franchising and the there my rise a legal difference in different countries thereby bring some operational challenges in some geographical locations. Franchise agreements will therefore dictate how the franchisor and franchisee run the business in a foreign nation thereby limiting creativity in the
According to Daniels(2004), franchising is a specialized form of licensing in which the franchisor nor only sells an independent franchisee the use of the intangible property (usually a trade mark or patents) essential to the franchisee’ business but also operationally assists the business on a continuing basis, such as through sales promotion and training.
So basically the advantage of the franchisor is that franchising is an alternative way of building "chain stores" in order to distribute goods that avoid the investments and liability of a chain. The franchiser will succeed if the franchisees
Regrading the staff recruitment within franchises, only franchisee is responsible for this task. Furthermore, franchising increases market penetration, it means franchisees appear to be part of local community and this gives them an opportunity to gain new business. International potential is also included in franchising list of advantages. If a company has serious intentions to expand its business internationally, franchising multiplies chances to achieve such a goal. It allows to adapt the business to the foreign market. As a result, it is obvious that there are numbers of reasons why franchising is useful and beneficial for business(“Reasons For Franchising Your Business”,
Franchising has always been an effective and efficient means of expanding businesses and there is a firmly established franchise market in the United States and the United Kingdom. Franchising offers several advantages, such as relatively unsaturated markets, transitioning economies, free-trade zones, friendly business laws, and liberalized markets and most of which come from emerging markets. Lots of multinational companies have chosen to franchise as a means to enter the emerging markets because it is governed by a contractual agreement which provides a desirable competitive advantage. (e.g. Paswan and Kantamneni, 2004; Alon, 2004). Trying to Explain the extraordinary growth of restaurant franchising within the United Kingdom and the United States has been one of the major focuses in the academic franchising literature over a couple of years. In the United States, United Kingdom, Canada, and some other parts of Western Europe, restaurant franchising has attained domestic market saturation, consequently, emerging markets stay relatively unexploited. The establishment of Restaurant franchising in emerging markets is primarily within the last 20-30 years through corporate franchise agreements and master franchises, and to some extent, conversion franchising and joint venture franchising (Alon, I., Falbe, C.M., and Welsh1
The franchising is the chain of any particular business to run by diverse firms or affiliation successfully. The franchiser grants working their business attach to franchisee under franchiser 's term and condition. Assorted foundations business has different term and condition for its franchisee. Franchising business generally run in the regular lifestyle industry like McDonald 's, pizza cabin, domino 's, Subway at cetera. Some franchising chains similarly run in the organization gives efficient Western Union, Money gram, Post Shop et cetera. The greatest relationship of franchising is Subway restaurant
Today, franchising is a highly regulated industry which offers a great opportunity to those individuals who truly want to realize their dream and go into business for themselves.
Opening a franchise brings a brand name and materials to a business to produce instant recognition and bring in brand loyal consumers. A franchise creates a business relationship with a franchisor to bring a brand name, trade dress, and trademark to a franchisee (Kubasek et al., 2015, p. 431). In turn for the franchise material and name, the franchisee pays a percentage of sales to the franchisor (Kubasek et al., 2015, p. 431). As reported in 2011, franchising was so popular that it was the genesis of one of every 12 retail businesses in the United States (Welsh, Desplaces, & Davis, 2011, p. 4). A weakness of owning a franchise was reported by Perrigot, Hussain, and Windsperger (2015) where “franchisees have to strictly follow operating manuals and almost all of the strategic decisions are made at the franchisor level” (p. 696). Although it does have a curtailed degree of freedom, a franchise brings greater stability with a proven business style and support system.
Franchising is a common term in daily life, business discourse, and the law. Nevertheless, the term is used in different contexts and with different meanings. Coughlan, Anderson, Stern, and El-Ansary employ the European Union’s description of franchising as a “…package of industrial or intellectual property rights.” The EU identifies three features of franchising—a common name or sign, with a uniform presentation of the premises, communication of know-how from franchisor to franchisee, and continuing provision of commercial or technical services by the franchisor to the franchisee.
Franchising has been long known to be an exciting venture for any person who wishes to buy into the idea (Timmons and Spinelli, 2008). There is an assortment of elements that combine to ensure a correct franchise opportunity is formed, which set the guidelines to ensure a franchisee is not being induced into an unfair agreement. No successful franchise would be established without following the four cornerstones of franchising (Webber, 2012 pg. 13), this includes: the license itself, the assurance that the franchisor has rightful ownership to the company, the franchise agreement itself and the structure of how the fees will be set out (Webber, 2012).
According to Hill, Jones, and Schilling (2015), franchising is a strategy in which the franchisor or the founding company grants the franchisee, the purchasing company, the right to use the franchisor’s name, reputation, and business model in return for a fee and often percentage of the profit. The business must operate under strict guidelines, follow the rules, regulations, and standards given by the founding franchisor (Hill, et al 2015, p. 182). In return this creates a business relationship between the two. According to Ribeiro, D., & Akehurst, G. P. (2014) franchising has become a major driver of business development and franchisor brand equity is a critical factor with a clear impact on the perception and behavior of the franchise. Franchises brings together independent companies and establish agreements between two parties.