FRANCHISING

Shahzad ArainShahzad.cdcu@gmail.com

http://pakdata.net

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OUTLINES

• Franchising Terms

• Types Of Franchises

• The Advantages Of Franchising

• The Limitations Of Franchising

Franchising Terms

•Franchising A marketing system revolving around a two-party legal agreement, whereby the franchisee conducts business according to the terms specified by the franchisor

• Franchise ContractThe legal agreement between franchisor and franchisee

• Franchise

The privileges conveyed in the franchise contract

Franchising Terms

•FranchiseeAn entrepreneur whose power is limited by a contractual agreement with a franchisor

•FranchisorThe party in the franchise contract that specifies the methods to be followed and the terms to be met by the other party

Types of Franchises

•Product and Trade Name Franchise

Grants the right to use a widely recognized product or name

•Business Format Franchise

Provides an entire marketing system and ongoing guidance from the franchisor

•Piggyback Franchising

The operation of a retail franchise within the physical facilities of a host store

Types of Franchises

•Master LicenseeAn independent firm or individual acting as a sales agent with the responsibility for finding new franchises within a specified territory

•Multiple-Unit OwnershipHolding by a single franchisee of more than one franchise from the same company

•Area DevelopersIndividuals or firms that obtain the legal right to open several franchised outlets in a given area

The Advantages & Disadvantages of Franchising

Pluses Minuses

Formalized training

Financial assistance

Proven marketingmethods

Managerial assistance

Quicker startup time

Overall lower failurerates

Franchise fees

Royalties

Restrictions on growth

Less independence inoperations

Franchisor may be solesupplier of somesupplies

Termination/renewalclauses

The Advantages of Franchising (Cont’)•Proven marketing concept and customer base

•Training

•Financial assistance

•Operating assistance

Financial Assistance

•Start-up business costs are normally high and thus by teaming up with a franchise organization, the individual can increase her/his chance of receiving financial help.

•The franchisor might chose to use liberal payment schemes to the franchisee in order to get over the initial financial hurdle.

Operating Assistance

•The franchisor provides a range of operating services including site selection, bulk purchasing of equipment, and inventory.

•Other areas of assistance include the use of an established, nation-wide brand

Limitations Of Franchising

• Franchise costs

-Initial franchise fee

-Royalty payments

-Advertising costs

• Loss of independence

• Restrictions on Business Operations

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