Franchising

 What is a franchise
Ans: A franchise is a type of license that a party (franchisee) acquires to allow them to have
access to a business's (franchisor) proprietary knowledge, processes, and trademarks in
order to allow the party to sell a product or provide a service under the business's name. In
exchange for gaining the franchise, the franchisee usually pays the franchisor an initial start-
up and annual licensing fees.

 Why to become a franchisee because it;

o Spend less time getting started
o Benefit from national brand recognition
o Reduce risk as a business owner
o Lower costs with group purchasing power
o Ongoing business support

 Why to become a franchisor because it;

o The franchisor is not concerned with the day to day operation of the business
o The franchisor’s organization is compact and can earn profits without the
involvement of high capital risk
o The network has the ability to grow rapidly
o The franchisor has fewer staff and fewer staff problems
o Provide motivated owner/operator. It is generally recognized that franchisees have
greater motivation to succeed than company employees do
o It provides a wide and secure outlet for the products and services
o It enables the franchisor to service national customers using his network of
franchisees
o Continuous income from royalties which are based on the franchisees gross sales
and/or fixed fees
o Additional income from upfront fees
o Cost effective advertising and promotional activities
o The benefit of stronger purchasing and volume discounts
o New marketing concepts as many franchisors claim that 90% of their marketing
innovations are originated from motivated franchisees that all have the best interest
of the Franchise System at heart

 Why franchise system includes company outlets

Franchise system includes company outlets because franchise uses the trade mark of an
organization and run business under the umbrella. Also the franchisor wants to expend the
market and reach to the areas where it cannot easily approach so franchises in the form of
company outlet the easiest solution for an organization it also helps organization to
understand the nature and demand of their customers. Like in India, Mcdonald’s sells
vegetable burger and this demand was realized by the help of franchises which work in India
under the umbrella of Mcdonald’s.