Franchisinh (Session 25-26)
Franchising (Session 25-26)
What is Franchising?
Franchising
- Franchising is a form of business organization in which a firm that already has a successful product or service (franchisor) licenses its trademark and method of doing business to another business or individual (franchisee) in exchange for a franchise fee and an ongoing royalty payment.
- Some franchisors are established firms (like McDonald’s) while others are first-time enterprises being launched by entrepreneurs.
Two Types of Franchise Systems
Product and Trademark Franchise
- An arrangement under which the franchisor grants to the franchisee the right to buy its products and use its trade name.
- This approach typically connects a single manufacturer with a network of dealers or distributors.
o For example, General Motors has established a network of dealers that sell GM cars and use the GM trademark in their advertising and promotions.
o Other examples of product and trademark franchisors include agricultural machinery dealers, soft drink bottlers, and beer distributorships.
Business Format Franchise
- An arrangement under which the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.
- Fast-food restaurants, convenience stores, and motels are well-known examples of business format franchises.
o Business format franchises are by far the most popular form of franchising, particularly for entrepreneurial firms.
When to Franchise (From the Franchisor’s Point of View)
• Approach Franchising With Caution and Care
- Establishing a franchise system should be approached carefully and deliberately.
- Franchising is a complicated business endeavor, and an entrepreneur must look closely at all its aspects before deciding to franchise.
• Regulations
- An entrepreneur should also be aware that over the years a number of fraudulent franchise organizations have come and gone and have left financially ruined franchise owners behind.
• When Is Franchising Most Appropriate?
- Franchising is most appropriate when a firm has a strong or potentially strong trademark, a well-designed business method, and a desire to grow.
- A franchise system will ultimately fail if the franchisee’s brand doesn’t add value for customers and its business method is flawed or poorly developed.
Buying a Franchise (From the Franchisee’s Point of View)
• Buying a Franchise
- Purchasing a franchise is an important business decision involving a substantial financial commitment.
- Potential franchise owners should strive to be as well informed as possible before purchasing a franchise and should be aware that it is often legally and financially difficult to exit a franchise relationship.
The Costs Involved With Buying a Franchise
• Initial Franchise Fee
- The initial fee varies depending on the franchisor
• Capital Requirements
- The costs vary but may include the cost of buying real estate, the cost of putting up a building, the purchase of inventory, and the cost of obtaining a business license.
• Continuing Royalty Payment
- Typically 3% to 7% of monthly gross income.
• Advertising Fees
- Franchisees are often required to pay into a national or regional advertising fund.
• Other Fees
- Other fees may be charged for various activities, including:
o Training additional staff.
o Providing management expertise when needed.
o Providing computer assistance.
o Providing a host of other items or support services.
More About Franchising
• Franchise Ethics
- The majority of franchisors and franchisees are highly ethical.
- There are certain features of franchising, however, the make it subject to ethical abuse. These features are as follows:
o The get rich quick mentality.
o The false assumption that buying a franchise is a guarantee of business success.
o Conflicts of interest between franchisors and franchisees.
• International Franchising
- International opportunities for franchising are becoming more prevalent for the following two reasons:
o The markets for certain franchised products in the U.S. have become saturated (i.e., fast food).
o The trend towards globalization continues.
- Steps to take before buying a franchise overseas:
o Consider the value of the franchisor’s name in the foreign country.
o Get a good lawyer.
o Determine whether the product or service is salable in the foreign country.
o Find out how much training and support you will receive from the franchisor.
What is Franchising?
Franchising
- Franchising is a form of business organization in which a firm that already has a successful product or service (franchisor) licenses its trademark and method of doing business to another business or individual (franchisee) in exchange for a franchise fee and an ongoing royalty payment.
- Some franchisors are established firms (like McDonald’s) while others are first-time enterprises being launched by entrepreneurs.
Two Types of Franchise Systems
Product and Trademark Franchise
- An arrangement under which the franchisor grants to the franchisee the right to buy its products and use its trade name.
- This approach typically connects a single manufacturer with a network of dealers or distributors.
o For example, General Motors has established a network of dealers that sell GM cars and use the GM trademark in their advertising and promotions.
o Other examples of product and trademark franchisors include agricultural machinery dealers, soft drink bottlers, and beer distributorships.
Business Format Franchise
- An arrangement under which the franchisor provides a formula for doing business to the franchisee along with training, advertising, and other forms of assistance.
- Fast-food restaurants, convenience stores, and motels are well-known examples of business format franchises.
o Business format franchises are by far the most popular form of franchising, particularly for entrepreneurial firms.
When to Franchise (From the Franchisor’s Point of View)
• Approach Franchising With Caution and Care
- Establishing a franchise system should be approached carefully and deliberately.
- Franchising is a complicated business endeavor, and an entrepreneur must look closely at all its aspects before deciding to franchise.
• Regulations
- An entrepreneur should also be aware that over the years a number of fraudulent franchise organizations have come and gone and have left financially ruined franchise owners behind.
• When Is Franchising Most Appropriate?
- Franchising is most appropriate when a firm has a strong or potentially strong trademark, a well-designed business method, and a desire to grow.
- A franchise system will ultimately fail if the franchisee’s brand doesn’t add value for customers and its business method is flawed or poorly developed.
Buying a Franchise (From the Franchisee’s Point of View)
• Buying a Franchise
- Purchasing a franchise is an important business decision involving a substantial financial commitment.
- Potential franchise owners should strive to be as well informed as possible before purchasing a franchise and should be aware that it is often legally and financially difficult to exit a franchise relationship.
The Costs Involved With Buying a Franchise
• Initial Franchise Fee
- The initial fee varies depending on the franchisor
• Capital Requirements
- The costs vary but may include the cost of buying real estate, the cost of putting up a building, the purchase of inventory, and the cost of obtaining a business license.
• Continuing Royalty Payment
- Typically 3% to 7% of monthly gross income.
• Advertising Fees
- Franchisees are often required to pay into a national or regional advertising fund.
• Other Fees
- Other fees may be charged for various activities, including:
o Training additional staff.
o Providing management expertise when needed.
o Providing computer assistance.
o Providing a host of other items or support services.
More About Franchising
• Franchise Ethics
- The majority of franchisors and franchisees are highly ethical.
- There are certain features of franchising, however, the make it subject to ethical abuse. These features are as follows:
o The get rich quick mentality.
o The false assumption that buying a franchise is a guarantee of business success.
o Conflicts of interest between franchisors and franchisees.
• International Franchising
- International opportunities for franchising are becoming more prevalent for the following two reasons:
o The markets for certain franchised products in the U.S. have become saturated (i.e., fast food).
o The trend towards globalization continues.
- Steps to take before buying a franchise overseas:
o Consider the value of the franchisor’s name in the foreign country.
o Get a good lawyer.
o Determine whether the product or service is salable in the foreign country.
o Find out how much training and support you will receive from the franchisor.
Komentar
Posting Komentar