Franchising

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Franchising

  1. 1. Franchising<br />
  2. 2. What is a Franchise?<br />“A franchise operation is a contractualrelationship between the franchisorand franchiseein which the franchisor offers or is obliged to maintain a continuing interest in the business of the franchisee in such areas as know-how and training; wherein the franchisee operates under a common trade name, format and/or procedure owned or controlled by the franchisor, and in which the franchisee has or will make a substantial capital investment in his business from his own resources.”<br />
  3. 3. Features<br /><ul><li>Legal and commercial arrangement
  4. 4. Use of franchisor’s trade name, format, system and/or procedure under license
  5. 5. Means to raise capital and expand quickly
  6. 6. Assistance to franchisee
  7. 7. Marketing, management, advertising, store design, standards specifications
  8. 8. Payment by franchisee by way of royalty, licensee fee or other means</li></li></ul><li>Types<br />
  9. 9. Product Distribution-Eg<br />Produces the syrup concentrate <br />Sells the syrup concentrate<br />FRANCHISEE<br />Produces the final drink<br />Retail Stores<br />Vending Machine Operators<br />Restaurants & F&B Outlets<br />
  10. 10. Business Format- Eg.<br />Subway Outlet- Australia<br />Subway Outlet- France<br />
  11. 11. Advantages<br /><ul><li>Buying a name/reputation
  12. 12. Established markets
  13. 13. Technical/management assistance
  14. 14. Standardized procedures
  15. 15. Quality standards
  16. 16. Selection of location
  17. 17. Facility design
  18. 18. Quicker cash flow</li></li></ul><li>Disadvantages<br /><ul><li>Loss of independence
  19. 19. High initial fees
  20. 20. High royalties and advertising allowances
  21. 21. Contractual restrictions
  22. 22. Inapplicable advertising
  23. 23. Termination clauses
  24. 24. Unsuitable products
  25. 25. Lack of competitive advantage</li></li></ul><li>Franchisee’s Perspective<br /><ul><li> Proven operating location
  26. 26. Credible top management
  27. 27. Skilled field support staff
  28. 28. A trade identity
  29. 29. A proprietary operations manual
  30. 30. Effective training programs
  31. 31. Disclosure and offering documents
  32. 32. Plans for advertising, marketing, PR and promotion
  33. 33. A communications system
  34. 34. Sufficient capital</li></li></ul><li>Franchisor’s Perspective<br /><ul><li>Faster growth
  35. 35. Lower capital requirements
  36. 36. Motivation – franchisors are owners of the franchise
  37. 37. Control of locations
  38. 38. Revenue stream – franchise fees/royalties</li></ul>But…<br /><ul><li>Reduced control
  39. 39. Profit sharing
  40. 40. Greater commitment to operating support</li></li></ul><li>Franchising important to SMEs?<br /><ul><li>Leveraging on a recognized brand name
  41. 41. Enhancing business image
  42. 42. Ensuring consistent quality
  43. 43. Attaining higher productivity/better motivated staff
  44. 44. Access to good locations
  45. 45. Economies of scale
  46. 46. Reducing risks of failure</li></li></ul><li>

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