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“Franchising can be defined as a system based on a close and ongoing collaboration whereby a company, the franchisor, gets into partnership with one or several companies, the franchisee(s).
A franchise, by definition is a legal agreement that allows one organization with a product, idea, name or trademark to grant certain rights and information about operating a business to an independent business owner. In return, the business owner (franchisee) pays a fee and royalties to the owner. This one-time fee paid by the franchisee to the franchisor is referred to as a franchise fee. The fee pays for the business concept, rights to use trademarks, management assistance and other
“Franchising can be defined as a system based on a close and ongoing collaboration whereby a company, the franchisor, gets into partnership with one or several companies, the franchisee(s). Its.
services from the franchisor. This fee gives the franchisee the right to open and operate a business using the franchisor�s business ideas and products. A royalty fee is a continuous fee paid by the franchisee to the franchisor. The royalty fee is usually a percentage of the gross revenue earned by the franchisee. The Federal Trade Commission (FTC) is authorized by the United States Congress to regulate the franchise business. The Federal Trade Commission oversees the implementation of the Franchise
A franchise, by definition is a legal agreement that allows one organization with a product, idea, name or trademark to grant certain rights and information about operating a business to.
Trade Rule, which requires that franchisors disclose all pertinent information to potential buyers of a franchise, and monitors the activities of franchisors. There are four basic types of franchises used by businesses in the United States. Product Franchise: Manufacturers use the product franchise to govern how a retailer distributes their product. The manufacturer grants a store owner the authority to distribute goods by the manufacturer and allows the owner to use the name and trademark owned by the manufacturer.
Jonathan VazquezIntro to BusinessBusiness PaperMay 11, 1999 Burger King is a leader in today's fast-food industry, with locations in all 50 states and 56 international countries and territories around the.
The store owner must pay a fee or purchase a minimum inventory of stock in return for these rights. An example of this type of franchise is a tire store. Manufacturing Franchise: These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor�s name and trademark. This type of franchise if found most often in the food and beverage industry. Most bottlers of soft drinks receive a franchise
Worthy Franchises In my analysis of two retail franchises, A&W Restaurants, Inc. seemed like the type of franchise in which I would have been more likely to invest in if.
from a company and must use its ingredients to produce, bottle, and distribute the soft drinks. Business Opportunity Ventures: These ventures typically require that a business owner purchase and distribute the products for one specific company. The company must provide customers or accounts to the business owner, and, in return, the business owner pays a fee or other consideration as compensation. Examples include vending machine routes and distributorships. Business Format Franchising: This is the most popular form of franchising. In
The Subway Franchise
The Subway Franchise The Subway story started in 1965 in Bridgeport, Connecticut during the summer of 1965. 17 year old Fred DeLuca was trying to earn enough money to.
this approach, a company provides a business owner with a proven method for operating a business using the name and trademark of the company. The company will usually provide a significant amount of assistance to the business owners in starting and managing the company. The business owner pays a fee or royalty in return. Typically, a company also requires the owner to purchase supplies from the company. The Benefits of Franchising One of the main benefits of franchising is
Location Analysis of a Franchise Resturaunt
Location Analysis of a Franchise Resturaunt Kristoffer Eyvindson University of Saskatchewan.
lower risk. Most business experts agree that a franchise operation has a lower risk of failure than an independent business. A reason for this is that the product or service is already established. A franchisor offers a product or service that has sold successfully. An independent business is based on both an untried idea and operation. Three factors will help you to predict the potential success of a franchise. The first is the number of franchises that are in operation.
LEGAL AID: Work-placement Report 'Legal Aid Franchising'
LEGAL AID. FRANCHISING: THE NEXT STEP FORWARD?Legal Aid franchising is perhaps the most controversial legal practice issue the legal profession has had to deal with in the last few years.
The second predictor is how long the franchisor and its franchisees have been in operation. A third factor is the number of franchises that have failed ;including those bought back by the franchisor. Another benefit of franchising is a large degree of assistance. The most difficult aspect of a new business is start up. Few experienced managers know about how to set up a new business because they only do it a few times. However, a franchisor has a great
innovation in business
Introduction The growth of franchising in America and Europe since the 1970s[1-4] has led to this business form assuming increasing impor-tance in a number of academic debates, including the fields.
deal of experience accumulated from helping its franchisees with start up. This experience will help reduce mistakes that are costly in both money and time. Assistance is usually offered once the initial start up is completed. For instance, a franchisor will provide management assistance, such as accounting procedures, personnel management, facility management, etc. Marketing assistance is typically offered as well. A franchisor can prepare and pay
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Franchising Essay, Research Paper
Franchising can be defined as a system based on a close and ongoing collaboration whereby a company, the franchisor, gets into partnership with one or several companies, the franchisee(s). Its prime aim is to develop a franchise concept designed in the first place by the franchisor. (Internet, 1)
In order to better understand the concept of franchising I will first explain several commonly used terms in this concept.
Franchise is a legal agreement that allows one organization with a product, idea, name or trademark to transmit some rights and information about a business to an independent business owner, which in return pays a fee and royalties to the owner.
Franchisor is a company that owns a product, service, trademark or business format and provides this to a business owner in return for a fee. Franchisor often is the one that makes the conditions under which a business owner operates, however he doesn?t control the business.
Franchisee is a business owner who purchases a franchise from franchisor and operates a business using the name, product, business format and other items provided by the franchisor.
Franchise fee is a one time paid fee by the franchisee to the franchisor, and is paid for rights to use trademark, management assistance and some other services.
Royalty fee is a fee continuously paid by the franchisee to the franchisor- usually paid as a percent of gross revenue earned.
Franchise trade rule is a law by the Federal Trade Commission that places several legal requirements on the franchisors
Trademark is a distinctive name or/and symbol used to distinguish a particular product or service from all the others.
In practice we have four types of franchising- Product Franchise, Manufacturing Franchises, Business Opportunity Ventures, and Business Format Franchising. In the case of Product Franchise, manufacturers use the product franchise to govern how a retailer distributes their product. The manufacturer grants an owner of the store the authority to distribute goods by the manufacturer and he is allowed to use the name and trademark of the manufacturer. In return the storeowner has to pay a fee or purchase some inventory of stock in return for the rights given. Manufacturing Franchises provide an organization with the right to manufacture a product and to sell it using the name and the trademark provided by franchisor. This type of franchising is usually seen in food and beverages industry.
Business Opportunity Venture usually requires that a business owner purchases and distributes the products for one specific company, which must provide him with the customers. In return business owner has to pay a fee or some other type of compensation. Finally, the Business Format Franchising, the most popular type, is the approach where a company provides a business owner with a proven method for operating a business using the name and the trademark. The company has to provide assistance to the owner of the business at the beginning, and the business owner has to pay a fee in return.
Usually people are asking what makes one company to offer a franchise, so it is important to understand the franchisor?s perspective. First of all, franchising is an opportunity for more rapid expansion. Many companies may experience of lack of capital and skilled employees, so the franchisee can offer all of that. At the beginning the franchisor assists a franchisee with obtaining financing for a new business, however the franchisee is liable for repayment of the funds. Franchisor is selecting its franchisees by their experience and skills, and in that way he/she is minimizing its risks. Another reason for franchising is higher motivation. This is because when the company franchises its operations it acquires a group of new, motivated managers, which are more accountable for actions since as an owners they are completely responsible for business outcomes. Further more capital is another reason for getting involved in franchising. The company, by franchising, is raising the money without selling an interest in the business, and the franchisor is using the franchisee money for further business expansion. This way the company is avoiding the risks, which may come out from issuing stock and taking the loans.
The company?s image and name are at certain risk when sold to other individual. So, a franchisor is very particular about the standards that franchisees are obliged to meet, and therefore franchisor indicate specific practices that other party must follow. Because of all that risk the franchisor reserves the right to buy back the franchise operation. On the other hand franchisees can take comfort in the fact that most franchisors want to see them succeed, which is motivation for providing necessary help. Another disadvantage for franchisor is the sacrifice of profits, because a company?s owned shop is much more profitable than a franchise. Also the franchisee has to have in mind the future ambitions of the franchisor-if the franchisor is expecting to buy back the business after a period of time, when the franchisee has already invested the time and the money in the business. Franchising business also has the liability of training the competitors. This is because the franchisee may acquire know how and than decide to open the same kind of business on his/her own under the different name. The good franchisor will try to establish good relationship with its franchisees in order to avoid this kind of problems in the future.
Furthermore it is important to look at the situation from the franchisee?s point of view, concerning the benefits and costs. Some of the major benefits of franchising are the following:
Lower Risks-according to the expert opinion and some statistics the franchising business is more likely to succeed and less risky.
Established product and service- the product offered is already established and sold in the market so comparing to the independent business, that is based on untried idea and operation, is much better. However franchisee should look at the number of franchisees in business, for how long they are operating, and the number of franchisees that have failed in conducting the successful business.
Experience of Franchisor- the experience, often-offered trough the training of the employees, that franchisor has increased the possibility for success.
Name Recognition- the franchisee is getting the name that is already well recognized locally or internationally.
Management Assistance- this is the benefit because the franchisor is providing the franchisee with necessary professional helps. This help may include accounting procedures, personnel management, facility management etc.
Business Plan- very often franchisor is providing franchisee with the help in developing business plan.
Start-up Assistance- since the most difficult aspect of a new business is a start-up it is very helpful to have professional help.
Marketing Assistance- the franchisor can provide and pay for the development of professional advertising campaigns.
Assistance in Financing- new franchisee is able to get financial help from some institutions due to the agreement between the institution and the franchisor, since the institutions might find such the agreement profitable due to the high success rate of franchise business.
Another issue that franchisee should keep in mind is the cost. The first cost that will occur in this agreement is the payment of franchise fee, and it can range from few thousands to several hundred of thousands dollars. Another fee is on going royalty fees. This is the fee required by franchisor to be paid continuously as a percentage of the gross income from the business. This percentage is usually less than 10%. Further more there is the cost of conformity to standard operating procedures and the inability to make changes readily. The franchisor may prohibit franchisee from selling products or services other than the ones approved by him/her. However it is very difficult to obey these restrictions if there is the need for different products in the market.
Another issue is the duration of the relationship. Typically, there is no way to clear away from the business other than sell it, however there might be some restrictions about that issue. Also the future franchisee should pay attention to the question of franchisor buying back the business.
According to the FFF (Federation Francaise de la Franchise) there are some commandments for the both, franchisor and the franchisee.
The 10 Commandments for the franchisor
1/ The necessary capital, you shall have.
2/ A market study, you shall make.
3/ A trademark, you shall protect.
4/ Your concept, you shall test.
A franchise is a licensing agreement where one party licenses use of a business system or product to another party. The franchiser is the owner of the business or product. The franchisee is the party that licenses the use of the business or product. Usually, a franchisee will pay the franchiser an initial fee to franchise the business or product. Then, the franchisee continues to pay royalty payments for the life of the franchise term. In return, they receive access to legally operate a franchise business or market a franchised product plus any assistance in operating and/or marketing the franchise.Product Franchise
Product franchises allow a franchisee to sell goods originally produced or controlled by an owner that bear the owner's trademark. The franchisee receives significant assistance from the franchiser on how the product is distributed and marketed. They must be sure to follow the guidelines and/or policies set forth by the franchiser. Product franchisees often benefit from national marketing campaigns and benefit from the name recognition usually associated with the trademarked products. Distributors of products like beer or automobiles are examples of product franchises.Advantages
Franchising allows rapid growth and expansion of a product concept much more quickly than corporations. Because franchisees are essentially in business for themselves, they often bring a new energy and drive into marketing the products and expanding the brand. Franchisees use their own capital and staff to grow their business. They have the ability to become successful and/or profitable quickly because the trademarked brands often already have a customer base. The franchiser reaps the benefits of this growth via royalty fees.Legal Aspects
Nearly 20 states have laws that regulate some portion of franchise agreements. These laws include stipulations that deal with terminating a franchise relationship and/or renewing a franchise relationship. In addition, many of the laws cover items such as default, arbitration, discrimination, transfer of franchise agreement, the franchiser's right to injunctive relief and the right of the franchiser to change the terms or operations manual for a particular franchisee. Section 5 of the Federal Trade Commission Act, which addresses deceptive trade practices, also governs franchise agreements. The FTC keeps a close watch on franchisers to ensure that franchisees are not taken advantage of. Furthermore, several states have created state-level FTC like agencies to further address deceptive trade practices in a franchise relationship.Considerations
Litigation is often commonplace in franchise relationships. Many times a franchisee becomes less than satisfied with the franchise agreement for one reason or another. As a franchisee learns and continues to grow their business, they may not feel what the franchiser is offering, in terms of assistance, systems, method of operations, etc. is worth the amount of royalty they are continuing paying. As a result, some type of litigation to terminate or amend the agreement may ensue.
Location Analysis Of a Franchise Restaurant encountered by the franchisers over the years. Thus, the franchiser has learned how to overcome the obstacles which may come about and the franchiser can provide The Subway Franchise franchise opened in Wallingford, Connecticut in 1974. The initial franchise fee. you need. 94% of all franchise owners consider their Subway successful. In What Is a Franchise? of the goods and services in the U.S. are moved through franchising. It's hard to believe but franchising actually came within 11 votes of being outlawed by Congress International Franchising Franchising in Emerging Markets. Franchise Chat. 2005. (www.franchise-chat.com/resources/franchising_in_emerging_markets.htm). Curtis, Ron (1998), Franchising
Submitted by edatsoi to the category Business and Industry on 11/02/2012 12:46 AM
Semester 2, 2012
Assessment 2 | Written Assignment – Franchising Conflict |
Due date | Week 6 Sunday 2 September (midnight) |
Instructions | This assignment comprises two scenarios involving franchising conflict as outlined below. You are required to recommend appropriate methods of conflict resolution for each scenario. |
Length | 1500-2000 words (split evenly across both questions) |
Marking criteria | A rubric containing the marking criteria for this assessment is on the Learning@Griffith website |
1. Billy Baxter dispute
Research the circumstances surrounding the recent ‘Billy Baxter’ franchisor-franchisee dispute. Here are two articles but you should also search for further information.
How could the initial conflict that arose from the non-payment of royalties by the franchisees have been better handled by both the franchisees and the franchisor?
2. Subaru online sales
Subaru recently released a new model vehicle in Australia, the BRZ sports car. Buyers were required to purchase the vehicle online and it sold out in just three hours.
See this media report for further information:
Describe any potential conflict that might arise from franchisees who may feel they have been cut out of the selling process and offer suggested solutions for minimising the conflict.
* View and read instructions about how to write an essay in the GBS Resources Bank (access via Tab on left hand side of Learning@Griffith site).
* You will need to provide.
This paper works out a conceptual framework for studying the performance of franchising networks. Franchising networks, which originally developed in the context of Western economies, are currently operating in transition economies as well. Some franchising networks fail and some succeed. The paper views performance of networks as a complex process of adaptation to the environment. Characteristics of networks, which appear due to the environment, influence the drivers of performance, i.e. the factors that are responsible for the networks’ success or failure. The paper is theoretical and makes use of different sources of evidence: empirical and theoretical studies on franchising and inter-organisational networks. The conceptual framework is finally tested on a small case study of two franchising networks operating in Russia.
JEL-code: Franchising Networks, Performance, Flexibility, Information Exchange, Innovation and Learning
I. Introduction 3
II. Definition of franchising networks 4
III. Institutional environment of a transition economy 5
IV. Performance of franchising networks 7
A. Flexibility 7
B. Information exchange 10
C. Innovation and learning 12
IV. Conceptual Framework 15
A. Sociological and Economic Traditions of Network Research 15
B. Economic Theories for the Study of Networks 16
C. Sociological Theories for the Study of Networks 17
D. Conceptual Framework for the study of Performance of Franchising Networks 20
V. Empirical case study 23
VI. Conclusions 23
VII. Bibliography 25
With people waiting in line for three hours to get into the first McDonald’s restaurant opened in Moscow in 1990, the concept of franchising was brought to Russia. After almost a decade this concept does not sound unfamiliar any more. Lots of Western companies like McDonald’s, Alphagraphics.