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  1. 1. Franchises by Pauline Komesli
  2. 2. Definition <ul><li>Definition: a business run by one firm under the name of another. The franchiser gives the franchisee a license permitting them to sell goods or services under the franchiser’s brand name, usually in return for a share of the franchisee’s profits. The franchisee’s license permits him/her to use the franchiser’s name, publicity materials, decor, uniforms, etc. </li></ul>
  3. 3. Why use a Franchise <ul><li>Many individuals use franchising as a means of starting up their own business. There is less likelihood of failure as support and guidance is provided by the franchiser to the franchisee. </li></ul><ul><li>Businesses such as McDonald’s operate some branches directly and others as franchises. Other examples of franchises: Kentucky Fried Chicken, the Body Shop and the British School of Motoring (BSM). </li></ul>
  4. 4. Franchiser Advantages <ul><li>It is a quick way to enter new geographical markets and the franchiser’s name becomes more well known as the business expands. </li></ul>
  5. 5. Franchiser Disadvantages <ul><li>Franchisers are reliant on franchisees to maintain the image and ‘good name’ of the business. </li></ul>
  6. 6. Franchisee Advantages <ul><li>The new business can begin trading on the established reputation of the franchiser immediately. </li></ul><ul><li>The franchisee has the advantage of a well known brand name and back up service. </li></ul><ul><li>All franchisees can benefit from ideas generated by each of them. For example, when a McDonald’s franchisee thought up the ‘Egg McMuffin’, the recipe was circulated to all the other franchisees and the product became very successful. </li></ul>
  7. 7. Franchisee Disadvantages <ul><li>A percentage of the profits has to be paid to the franchiser. </li></ul><ul><li>The franchiser may impose strict rules on the franchisees and restrict their ability to operate on their own initiative. </li></ul><ul><li>The franchisee’s reputation and profitability depend in part on that of the franchiser and the performance of the other franchisees. </li></ul>
  8. 8. Different types of Franchises <ul><li>There are several different types of franchise. </li></ul><ul><li>As well as complete packages, there are franchises like car dealerships where you might have a contract to sell a product without trading under the franchise name. </li></ul><ul><li>There are also franchises where self-employed distributors sell goods on behalf of manufacturers. They make commission on the number of items they sell, and employ other distributors to work for them. </li></ul>
  9. 9. How to get started with a Franchise? <ul><li>Franchises can cost anything from a few thousand pounds for a mobile cleaning business to hundreds of thousands of pounds for a fast food franchise. Before you buy a franchise do your homework, write a business plan and carry out your own market research on your potential customers. </li></ul><ul><li>Speak to your bank. They will probably have a person who specialises in advising would-be franchisees. </li></ul><ul><li>You should look into the background of the franchisor. Find out how long the business been running, and how many franchises it has. Also check how successful its franchisees have been - have many failed? </li></ul><ul><li>You should also check into the support and training that you will receive. And look closely at the financial projections for your franchise. Make sure you are aware of the terms of your agreement, specifically how long you will have the franchise for, whether you'll have an option to renew it and what happens if you need to sell the business. </li></ul><ul><li>Never sign up without getting the agreement vetted by a lawyer. Make sure you speak to other franchisees - those suggested by the company, and others that you find by yourself. Ideally try to speak to a franchisee whose business failed. </li></ul>