WHY IS FRANCHISING SUCCESSFUL? We are BRAND DRIVEN and PEOPLE OF HABIT!
FRANCHISINGA network of interdependent business relationshipsthat 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 / Franchiser the person or company that grants the franchisee the right to do business under their trademark or tradename Franchisee the person or company that gets the right from the franchisor to do business under the franchisor’s trademark or tradename and benefits from it.
DEFINITION OF TERMS Franchise Agreement the legal, written contract between the franchisor and franchisee which tells each party what each is supposed to do Single-Unit Franchise Agreement an agreement where the franchisor grants the franchisee the rights to open and operate ONE franchise unit
DEFINITION OF TERMS Multi-Unit Franchise Agreement an agreement where the franchisor grants a franchisee the rights to operate MORE THAN ONE unit Area Development Franchise Agreement an 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 Agreement an 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 Statement the 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 Fee the 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 Fee represents 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 Fund the monthly fee paid by the franchisee for a common fund, managed by the franchiser for promoting the brand Copyright & Registered Trademark the 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.
TWO MAIN TYPES OF FRANCHISING PRODUCT DISTRIBUTION FRANCHISE BUSINESS FORMAT FRANCHISE NEXT
PRODUCT DISTRIBUTION FRANCHISEFranchise that simply sells the products of thefranchisor and have supplier-dealer relationshipsThe franchisor licenses its trademarks and logo tothe franchisee but does not necessarily providethem with an ENTIRE system for running theirbusinessUsual examples: soft drink distributors, automobiledealers and gas stations BACK
BUSINESS FORMAT FRANCHISEType of franchise includes not only the aproduct, service and trademark but alsothe complete method to conduct thebusiness itself, such as the marketing planand operations manualUsual examples: fast food, service,restaurants, retail, lodging, automotive,building & construction BACK
ADVANTAGES & DISADVANTAGES OF FRANCHISING ADVANTAGES DISADVANTAGES To the Franchisee Established Concept Tools for Success Unfulfilled Expectations Technical & Managerial Help Lack of Freedom Standards & Quality Control Advertisement & Promotion Minimum Risk Practices Less Operating Capital Cost of Services Access to Credit Over Dependence Comparative Assessment Monotony & Lack of Challenge Research & Development Termination and Renewal Advertisement & Promotion Other problems Other Opportunities
ADVANTAGES & DISADVANTAGES OF FRANCHISING ADVANTAGES DISADVANTAGES To the Franchiser Business Expansion Lack of Freedom Buying Power Franchisee’s Financial Operational Convenience Situation Franchisee’s Contribution Franchisee Recruitment, Selection and Retention Motivation & Cooperation Communication