This document discusses franchising. It defines key terms like franchisor, franchisee, and franchise agreement. It explains that franchising allows a brand, business method, and marketing system to be shared. The two main types of franchising are product distribution franchises and business format franchises. It lists advantages for both franchisees and franchisors, such as established brands and business expansion, but also disadvantages like lack of freedom and communication challenges.

1. InGrowth? or <Inorganic
Growth>
Naveen Sarpal
May 1, 2013

2. FRANCHISING
freedom from servitude . . .

3. WHY IS FRANCHISING SUCCESSFUL?

4. WHY IS FRANCHISING SUCCESSFUL?
We are
BRAND DRIVEN
and
PEOPLE OF HABIT!

5. FRANCHISING
A network of interdependent business relationships
that 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

6. 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.

7. 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

8. 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

9. 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

10. 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

11. 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.
DEFINITION OF TERMS

12. TWO MAIN TYPES OF FRANCHISING
PRODUCT DISTRIBUTION FRANCHISE
BUSINESS FORMAT FRANCHISE
NEXT

13. PRODUCT DISTRIBUTION FRANCHISE
Franchise that simply sells the products of the
franchisor and have supplier-dealer relationships
The franchisor licenses its trademarks and logo to
the franchisee but does not necessarily provide
them with an ENTIRE system for running their
business
Usual examples: soft drink distributors, automobile
dealers and gas stations
BACK

14. BUSINESS FORMAT FRANCHISE
Type of franchise includes not only the a
product, service and trademark but also
the complete method to conduct the
business itself, such as the marketing plan
and operations manual
Usual examples: fast food, service,
restaurants, retail, lodging, automotive,
building & construction
BACK

15. ADVANTAGES & DISADVANTAGES OF FRANCHISING
ADVANTAGES DISADVANTAGES
To the Franchisee
Established Concept
Tools for Success
Technical & Managerial Help
Standards & Quality Control
Minimum Risk
Less Operating Capital
Access to Credit
Comparative Assessment
Research & Development
Advertisement & Promotion
Other Opportunities
Unfulfilled Expectations
Lack of Freedom
Advertisement & Promotion
Practices
Cost of Services
Over Dependence
Monotony & Lack of Challenge
Termination and Renewal
Other problems

16. ADVANTAGES DISADVANTAGES
To the Franchiser
Business Expansion
Buying Power
Operational Convenience
Franchisee’s Contribution
Motivation & Cooperation
Lack of Freedom
Franchisee’s Financial
Situation
Franchisee Recruitment,
Selection and Retention
Communication
ADVANTAGES & DISADVANTAGES OF FRANCHISING