franchising intro
TRANSCRIPT
FRANCHISING
freedom from servitude . . .
WHY IS FRANCHISING SUCCESSFUL?
WHY IS FRANCHISING SUCCESSFUL?
We are BRAND DRIVEN
and PEOPLE OF
HABIT!
FRANCHISINGA network of interdependent business relationships that allows a number of people to share:
1. A brand identification
2. A successful method of doing business
3. A proven marketing and distribution system
DEFINITION OF TERMS
Franchisor / Franchiserthe person or company that grants the franchisee the right to do business under their trademark or tradename
Franchiseethe person or company that gets the right from the franchisor to do business under the franchisor’s trademark or tradename and benefits from it.
Franchise Agreementthe legal, written contract between the franchisor and franchisee which tells each party what each is supposed to do
Single-Unit Franchise Agreementan agreement where the franchisor grants the franchisee the rights to open and operate ONE franchise unit
DEFINITION OF TERMS
Multi-Unit Franchise Agreementan agreement where the franchisor grants a franchisee the rights to operate MORE THAN ONE unit
Area Development Franchise Agreementan agreement where the franchisee has the right to open more than one unit during a specific time, within a specific area
DEFINITION OF TERMS
Master Franchise Agreementan agreement where the franchisee is given more rights than an area development agreement; such as sub-franchising or the right to sell franchises to other people within a territory
UFOC / Disclosure Statementthe Uniform Franchise Offering Circular is the disclosure document that provides the information about the franchisor and franchise system to a prospective franchisee.
DEFINITION OF TERMS
Franchise Feethe payment given to the franchiser for joining the network. It can be seen as an entry fee paid for the “secrets of the business”.
Royalty Feerepresents the amount the franchisee pays the franchiser every month (or whenever agreed) for commission of its sales. In return, the franchiser provides continuous training, market studies and release of new products.
DEFINITION OF TERMS
Advertising / Marketing Fundthe monthly fee paid by the franchisee for a common fund, managed by the franchiser for promoting the brand
Copyright & Registered Trademarkthe usage of the brands & products / special services / methods of production, etc. patented by the franchiser are authorized to the franchisees and will be protected from abusive usage by potential customers.
DEFINITION OF TERMS
TWO MAIN TYPES OF FRANCHISING
PRODUCT DISTRIBUTION FRANCHISE
BUSINESS FORMAT FRANCHISE
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PRODUCT DISTRIBUTION FRANCHISE
Franchise that simply sells the products of the franchisor and have supplier-dealer relationships
The franchisor licenses its trademarks and logo to the franchisee but does not necessarily provide them with an ENTIRE system for running their business
Usual examples: soft drink distributors, automobile dealers and gas stations
BACK
BUSINESS FORMAT FRANCHISEType of franchise includes not only the a product, service and trademark but also the complete method to conduct the business itself, such as the marketing plan and operations manual
Usual examples: fast food, service, restaurants, retail, lodging, automotive, building & construction
BACK
ADVANTAGES & DISADVANTAGES OF FRANCHISING
ADVANTAGES DISADVANTAGES
To the FranchiseeEstablished Concept
Tools for SuccessTechnical & Managerial HelpStandards & Quality Control
Minimum RiskLess Operating Capital
Access to CreditComparative AssessmentResearch & Development
Advertisement & Promotion
Other Opportunities
Unfulfilled ExpectationsLack of Freedom
Advertisement & Promotion Practices
Cost of ServicesOver Dependence
Monotony & Lack of ChallengeTermination and Renewal
Other problems
ADVANTAGES DISADVANTAGES
To the Franchiser
Business ExpansionBuying PowerOperational ConvenienceFranchisee’s ContributionMotivation & Cooperation
Lack of FreedomFranchisee’s Financial
SituationFranchisee
Recruitment, Selection and Retention
Communication
ADVANTAGES & DISADVANTAGES OF FRANCHISING