WHY IS FRANCHISING SUCCESSFUL?We areBRAND DRIVENandPEOPLE OF HABIT!
FRANCHISINGA network of interdependent business relationshipsthat allows a number of people to share:1. A brand identification2. A successful method ofdoing business3. A proven marketing anddistribution system
DEFINITION OF TERMSFranchisor / Franchiserthe person or company that grants thefranchisee the right to do business undertheir trademark or tradenameFranchiseethe person or company that gets the rightfrom the franchisor to do business underthe franchisor’s trademark or tradenameand benefits from it.
Franchise Agreementthe legal, written contract between the franchisorand franchisee which tells each party what eachis supposed to doSingle-Unit Franchise Agreementan agreement where the franchisor grants thefranchisee the rights to open and operate ONEfranchise unitDEFINITION OF TERMS
Multi-Unit Franchise Agreementan agreement where the franchisor grants afranchisee the rights to operate MORE THANONE unitArea Development Franchise Agreementan agreement where the franchisee has theright to open more than one unit during aspecific time, within a specific areaDEFINITION OF TERMS
Master Franchise Agreementan agreement where the franchisee is givenmore rights than an area developmentagreement; such as sub-franchising or the right tosell franchises to other people within a territoryUFOC / Disclosure Statementthe Uniform Franchise Offering Circular is thedisclosure document that provides theinformation about the franchisor and franchisesystem to a prospective franchisee.DEFINITION OF TERMS
Franchise Feethe payment given to the franchiser for joiningthe network. It can be seen as an entry fee paidfor the “secrets of the business”.Royalty Feerepresents the amount the franchisee pays thefranchiser every month (or whenever agreed) forcommission of its sales. In return, the franchiserprovides continuous training, market studies andrelease of new products.DEFINITION OF TERMS
Advertising / Marketing Fundthe monthly fee paid by the franchisee for acommon fund, managed by the franchiser forpromoting the brandCopyright & Registered Trademarkthe usage of the brands & products / specialservices / methods of production, etc. patentedby the franchiser are authorized to thefranchisees and will be protected from abusiveusage by potential customers.DEFINITION OF TERMS
TWO MAIN TYPES OF FRANCHISINGPRODUCT DISTRIBUTION FRANCHISEBUSINESS FORMAT FRANCHISENEXT
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 stationsBACK
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 & constructionBACK
ADVANTAGES & DISADVANTAGES OF FRANCHISINGADVANTAGES DISADVANTAGESTo the FranchiseeEstablished ConceptTools for SuccessTechnical & Managerial HelpStandards & Quality ControlMinimum RiskLess Operating CapitalAccess to CreditComparative AssessmentResearch & DevelopmentAdvertisement & PromotionOther OpportunitiesUnfulfilled ExpectationsLack of FreedomAdvertisement & PromotionPracticesCost of ServicesOver DependenceMonotony & Lack of ChallengeTermination and RenewalOther problems
ADVANTAGES DISADVANTAGESTo the FranchiserBusiness ExpansionBuying PowerOperational ConvenienceFranchisee’s ContributionMotivation & CooperationLack of FreedomFranchisee’s FinancialSituationFranchisee Recruitment,Selection and RetentionCommunicationADVANTAGES & DISADVANTAGES OF FRANCHISING