Franchising involves a franchisor granting authorization to a franchisee to sell its products and services. There are two main types of franchising: business format franchising and product/trademark franchising. Business format franchising provides franchisees with a complete business system, brand name, marketing plan, and ongoing support from the franchisor. While franchising offers advantages like quick expansion and local community connections for franchisees, it also involves disadvantages such as restrictions, unwanted products or procedures imposed by the franchisor.

1. SQA HOT 103

2. What is a Franchise?
The History of Franchising
How Franchising Works
Owning a Franchise
Franchising Issues

3. Authorization given by a
company, to another
individual or company, to
sell its products & services

4. • Franchising• Franchisee
• Franchisor• Franchise
Business
Format
Product
Owner of
Trademark
Continuing
Relationship
Recipient of
granted or
rights for
business

5. Product or trade-name
Franchisees sell manufactured products to
franchisor
Can be found in industries such as
automobile, drinks & gasoline
Similar to supplier-dealer kind of relationships
Business format
Franchisee makes use of franchisor’s brand
name & trademark
Franchisee gets to use complete business
system
Business format to achieve consistency
resulting in success
Franchisee is empowered with a detail plan
that details almost all related to operation
Franchisee is provided with advertising,
marketing, training etc.

6. Initial Fee Ongoing Fees

7. Self
management
Financial
independence
Career
advancement
New
skills/training
Long-term
investment

8. Advantages
Disadvantages
• Site-selection
• Credit
• Construction expertise
• Fixtures and equipment
• Training
• Opening support
• Promotional assistance
• Economies of scale
• Ongoing support
• Restrictions
• Unwanted products or procedures
• Unwanted advertising
• Unprotected territories
• Cancellation
• Inadequate training

9. Advantages
Disadvantages
• Little or no capital required for
expansion
• Quick expansion possible
• Franchisees shoulder investment risk
• Unit owners connected to local
community & Authorities
• They give up the profits generated by
the franchise units
• They give up some control over
operating procedures and marketing
approaches

10. Franchising
Issues
Encroachment
Financial &
Contract
violations
Mature
markets
Outlets in
nontraditional
locations

11. Any questions