Franchising

Luqman Hakeem Omer Iftikhar Shoaib Anwer

Definition:
A form of business organization in which a firm, which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisee) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee.

Two Parties :  Franchisee  An entrepreneur whose power is limited by a contractual agreement with a franchisor Franchisor  The party in the franchise contract that specifies the methods to be followed and the terms to be met by the other party  .

.  Control is with the parental company (Franchisor).  The Franchisor have the Authority to cancel the contract of a franchisee whenever they want..Authority and Control.

Growth of Franchising Franchising originated after the First World War with the development of petrol stations and motor vehicle dealerships. and it is particularly prominent in the food. service and retail industries. . Today there are many examples of franchising.

Continued……  Singer Sewing Machine – first franchise (mid-19th century)  Automobile (e.g. McDonald’s.g. Shell)  Soft drinks (e.g. Coca Cola)  Food and restaurants (e.g. Ford)  Petroleum products (e. Starbucks) .

Some Factors…..  Home markets saturated – attractive opportunities overseas  Relaxation of regulations in most countries  Expansion of international trade  Exposure to international media .

Subway: Submarine sandwiches & salads McDonalds: Hamburgers.The 20 Fastest-Growing Franchises 2009 1. 8. pasta. wings UPS Store/Mail Boxes Etc: Circle K: Convenience store Pizza Papa John’s Intl: . chicken. 3. 7. 6. 2. 4. 10. salads Liberty Tax Service: Income-tax preparation Sonic Drive-In Restaurants: USA (44 franchises) Inter Continental Hotels: Ace Hardware:Home improvement store Pizza Hut: Pizza. 5. 9.

17. 19. Jiffy Lube Intl: Fast oil change Instant Tax Service: Baskin-Robbins USA: Ice cream KFC Corp: Jani-King: Dairy Queen: Super 8: Arby’s: Jan-Pro: Taco Bell: Chicken Commercial cleaning Hotels Sandwiches Commercial cleaning Quick-service Mexican . 13. 14. 12. 18. 15.11. 20. 16.

094  Jani-King  Jan-Pro Commercial cleaning $11.958 .050 Intl Commercial cleaning $3.000 .$75.$35.405  Kumon Math Centers Supplemental education $32.$131.427 .980 .400 .$50.450 -$57.$84.Top 12 Low-Cost Franchises 2010 H & R Block Tax preparation and electronic filing $26.750  Jazzercise Inc Dance fitness classes $2.145 .$89.000 .070  Stratus Building Solutions Commercial cleaning $3.500  Instant Tax Service Retail tax preparation $39.

$15.450  Anago Cleaning Systems Commercial cleaning $8.306 .100  ServiceMaster Clean Disaster cleaning $20.750 . Vanguard Cleaning Commercial cleaning $8.$132.623  Bonus Building Care Commercial cleaning $9.000 .125 .$59.926 .000  Merry Maids Residential cleaning $24.$38.543 -$55.

Categories of Franchising Four main categories:     Product and trade name franchises Manufacturing and production franchises Business format or system franchises Management franchising .

Product and trade name Franchises Product and trade name franchises are arrangements where franchisees are granted the right to distribute a manufacturer's product within a specified territory or at a particular location. .1. Petrol stations are a prime example of this. using the manufacturer's trade mark or trade name. in exchange for fees or royalties.

.Manufacturing and production Franchises A process or manufacturing franchise is an arrangement where a franchisor provides an essential ingredient or know-how to a processor or manufacturer.2. in the soft-drink industry. Franchises of this nature are common. for instance.

Examples of famous Manufacturing and production franchises .

2.Manufacturing and production franchises Example: Sells the syrup Produces the syrup FRANCHISEE Produces the final drink Retail Stores Restaurants & F&B Outlets Vending Machine Operators .

3. including a business plan. image. .Business format or system Franchises  Business format or system franchises add an extra layer. and quality of goods and services. management system. location. appearance.

Famous Examples .

Australia outlet in Marseille. France .3.BUSINESS FORMAT FRANCHISING outlet in Sale.

format and procedure for conducting the business.Management Franchising A form of service agreement. .4.  The franchisor provides the management expertise.

Famous Examples .

An Attractive Franchise Opportunity Includes:  Registered trademarks Successful prototype stores with a track record of profitability and a positive reputation A business that can be systematized so that it can be easily replicated. A product or service that can be successful in many different geographic regions.    .

Advantages of franchising  The Franchisor:      Less capital required Rapid expansion Retaining control Dedicated owner operators Benchmarking .

 The Franchisee:      A proven system Start up assistance Ongoing assistance Joint advertising Easier to obtain finance .

Disadvantages of Franchising  The Franchisor:  High operating cost  Reduced income per unit  Poor franchisee selection  The Franchisee:  Bad decisions by the Franchisor  Restrictions on the sale of the business  Restrictions on expansion/growth .

Franchising is more than distributorship  Extends to an entire operation or method of business Greater assistance. control and longer duration Distributor merely re-sells products to retailers or customers   .

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