Franchising

12 Key excerpts on "Franchising"

• 

  eBook - PDF

  Restaurant Franchising

  Concepts, Regulations and Practices, Third Edition

  • Mahmood A. Khan(Author)
  • 2014(Publication Date)
  • Apple Academic Press

    (Publisher)

  Franchising is also de fi ned as “a continuing relationship in which a fran-chisor provides a licensed privilege to the franchisee to do business and offers Introduction to Franchising 3 assistance in organizing, training, merchandising, marketing and managing. Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through af fi liated dealers (franchisees).” Since there are certain rights that pass from one party to another, there are legal aspects that should also be considered in any de fi nition of Franchising. From a legal standpoint, according to a report by the U.S. Congress House Committee on Small Business (1991), “Franchising is essentially a contrac-tual method for marketing and distributing goods and services of a company (franchisor) through a dedicated or restricted network of distributors (fran-chisees).” Under the terms of this legal franchise contract, a franchisor grants the right and license to franchisees to market a product or service or both, using the trademark and/or the business system developed by the franchisor. The contract imposes obligation on both parties. The franchisor must provide the product, proven marketing support, and training. The franchisee brings fi nancing, management skills, and a determination to own and operate a suc-cessful business. Franchising happens when someone develops a business model and sells the rights to another entrepreneur, a franchisee; the company selling the rights is the franchisor. The franchisee usually gets the rights to the business model for a speci fi c time period and in a speci fi c geographic area (Spinelli, Jr., Rosenberg & Birley, 2004). In the best arrangement every-one wins: the franchisor expands its number of outlets and gains additional income; the franchisee has a business of his or her own.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The Role of Franchising on Industry Evolution

  Assessing the Emergence of Franchising and its Impact on Structural Change

  • Rosalind Beere(Author)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  1 Franchising: An Overview 4 What is Franchising? In simple terms, a franchise is a particular form of organisation, in which the development of a business concept and its execution are undertaken by two different legal entities. The US FTC (the US government agency responsible for regulating Franchising) provides a legal definition of this arrangement. The term ‘franchise’ means any commercial relationship … whereby a per- son offers, sells or distributes to any person … goods, commodities, or services which are (1) identified by a trademark, service mark, trade name, advertising or other commercial symbol … or (2) directly or indirectly required or advised to meet the quality standards prescribed by another person where the franchisee operates under a name using the trademark, service mark, trade name, advertising or other commercial symbol. (Federal Trade Commission Rule 436.2, paragraph 6160) Comparatively, the International Franchise Association defines a fran- chise operation as ‘a contractual relationship between the franchisor and franchisee in which the franchisor offers or is obliged to maintain, a con- tinuing 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, or procedure owned by or controlled by the franchisor, and in which the franchisee has made or will make a substantial capital invest- ment in his business from his own resources’. The broad category of fran- chising is made up of two different business models: product Franchising and business format Franchising. Product Franchising is an arrangement in which one party, a franchisor, develops a trade name and licenses it to another party, a franchisee. The product franchise contractually agrees for the use of the trade name to deliver products or services to end customers for a certain time period, at a certain location.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  The Economics of Small Business

  An Introductory Survey

  • Roger A McCain(Author)
  • 2018(Publication Date)
  • WSPC

    (Publisher)

  Chapter 10

  Franchising

  A large number of small businesses benefit from long-term relationships with bigger businesses through contracts of Franchising. In the United States, there are approximately one million business establishments involved in Franchising.1 This chapter will consider some research on small businesses in Franchising. A franchise is a long-term relation between two businesses that is aimed at their mutual benefit. To the extent that it is successful, the relationship will generate a surplus, which economists call a “quasi-rent” and others might designate as value creation. This poses at least two questions. First, how can the governance of the relation be arranged so as to yield the largest surplus? Second, how is the surplus divided between the participants? The answer to both questions, but especially the second, will depend on the bargaining power of the participants. These questions will be taken up in turn, but first we will expand on the definition of Franchising.

  1.What is a Franchise?

  Franchising is a way of doing business in association with another business. A franchise is a relationship between businesses whereby one business, the franchisor, permits another business, the franchisee, to use the trademark and name of the franchisor in return for some fees and on certain conditions. This will ordinarily be a one-to-many relationship, with a single franchisor granting franchises to a number of franchisees, and the franchisees will commonly be small businesses.

  A distinction may be made between product distribution franchises and business format franchises. In a product-distribution franchise, the franchisee sells the franchisor’s product. In this case, the franchisor licenses the use of its trademark but most other aspects of the business are determined by the franchisee. Some examples are gasoline stations, automobile dealerships and soft drink distributors. In a business format franchise, the franchisee operates the business along the lines prescribed by the franchisor. Commonly, they are selling the franchisor’s product, but in addition the franchisor provides training, marketing services and guidelines such as an operations manual. Examples include “fast-food” restaurants, tax preparation services, some convenience stores and some hotel chains (PricewaterhouseCoopers, n.d.).

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Small Business Management

  Launching & Growing Entrepreneurial Ventures

  • Justin Longenecker, J. Petty, Leslie Palich, Frank Hoy(Authors)
  • 2019(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Franchising A process for expanding a business and distributing goods and services through a licensing relationship. franchisor The party in a franchise contract that specifies the methods to be followed and the terms to be met by the other party. franchisee The party in a franchise contract that is granted a license to do business under a particular trade- mark and trade name by the franchisor. product and trade name Franchising A franchise agreement granting the right to use a widely recognized product or trademark. business format Franchising A franchise arrangement whereby the franchisee obtains an entire market- ing, management, and supply system geared to entrepreneurs. franchise contract The legal agreement between franchisor and franchisee. Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Part 2 Starting from Scratch or Joining an Existing Business 70 performance. The most frequent means for carrying out these growth strategies are through use of the following: • A master licensee, a firm or individual having a continuing contractual rela- tionship with a franchisor to sell its franchises. This independent company or businessperson is a type of middleman or sales agent responsible for finding new franchisees within a specified territory. Master licensees may provide support services such as training and warehousing, which are more tradition- ally provided by the franchisor.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  An Introduction to Franchising

  • Robert Webber(Author)
  • 2017(Publication Date)
  • Red Globe Press

    (Publisher)

  A franchisor is a person or company that has created a commercial business and who wishes to allow other persons or companies to operate a business under their brand. and business model through experience, and is willing to allow other persons or companies a licence to carry on an independent business under the auspices of the franchisor’s brand or trade mark. Similarly, a ‘ fran-chisee ’ is typically defined as a person or company who participates in a franchise agree-ment as the purchaser of the right to carry on an autonomous business using the know-how and privileged trade secrets of the franchisor. Any franchise system should be based on the four cornerstones shown in Figure 2.1, and it can be taken for granted that these would be funda-mental to any definition of a franchise system: • The ownership by the franchisor of a brand, or a trade mark, or a secret process, or a DEFINING Franchising 13 A franchisee is a person or company that agrees to purchase the rights to operate an independent business using the franchisor’s specialist know-how and brand in exchange for a financial consideration. Figure 2.1 The four cornerstones of Franchising Franchising Franchise agreement Brand ownership Licensing Fee structure concept, or a patent, or a specialized item of equipment, coupled with the knowledge and goodwill connected with it. • The willingness of the franchisor to grant to an individual or business (the franchisee) a licence allowing the development and exploitation of the franchisor’s brand, trademark, secret process, idea, patent or equipment, comprising confidential and privileged information, and the associated goodwill and knowledge to maximize advancement. • The inclusion and acceptance by both parties to the franchise agree-ment or licence, of controls and regulations under which the contrac-tual rights and obligations of a business in which the franchisee exploits the rights granted, are to be managed.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Become a Franchise Owner!

  The Start-Up Guide to Lowering Risk, Making Money, and Owning What you Do

  • Joel Libava(Author)
  • 2011(Publication Date)
  • Wiley

    (Publisher)

  What Franchising Is, Exactly It’s now time for me to define precisely what a franchise is and what the Franchising model consists of so that you know what you may be getting yourself into (and I mean that in the best way possible, of course!). The following is my nonlegal definition of the franchise model: the entrepreneur (the franchisor) has invented a business—and its model— and is looking to replicate it by partnering with people that would like an opportunity to own their own business while building equity for them-selves and their families. The franchisor invests his or her own money up front, while leveraging company growth by using other people’s (specifi-cally, the franchisees’) money. Now here’s a textbook-style definition: a franchise typically involves the granting by one party (the franchisor ) to another party (the franchi-see ) the right to carry on a particular name or trademark, according to an identified system. Franchises are usually located within a territory or at one specific location for an agreed-upon amount of time. The franchisee receives a franchise license to use the franchise company’s trademarks, systems, signage, software, and other proprietary tools and systems in accordance with the guidelines set forth in the franchise contract. Doesn’t that sound exciting? Are you feeling a sense of unbridled enthusiasm like you’ve never felt before? I’ll just bet that you’re ready to take your checkbook out right now and go out and find a franchise busi-ness to buy. Explained: The Franchise Business Model with Benefits 53 Here’s the real deal: a franchise company (the franchisor ) came up with the idea for the service or product (or both) and is essen-tially granting you the right to market it for them. Because it is their idea, they require you to market it in a specific way. It is their system, so they write the rule book, and, in this case, the rule book includes parameters like their operations manual and the franchise agreement.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Franchising

  An International Perspective

  • Frank Hoy, John Stanworth(Authors)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  There were numerous other attempts at defining Franchising in this early period, but the above are representative of both the broad consensus among writers and the difficulties encountered in offering a conceptualization. The definitions seldom dealt satisfactorily with product franchises, such as automobile and petroleum distribution franchises and voluntary chain relationships between wholesalers and retailers in grocery and other retail trades. These involve a much less integrated relationship between the parties than occurs in the business format franchise on which the above definitions are mainly founded. However, whatever the problems, a working definition was required for the developing area of Franchising research. In 1983, in an attempt to meet some of the above points, Curran and Stanworth defined Franchising as:

  “A business form essentially consisting of an organization (the franchisor) with a market-tested business package centered on a product or service, entering into a continuing contractual relationship with franchisees, typically self-financed and independently owner-managed small firms, operating under the franchisor's trade name to produce and/or market goods or services according to a format specified by the franchisor” (1983, p.11).

  This definition was seen as covering most modern varieties of Franchising, and, in principle, no barriers appeared to exist to incorporating quasi-forms. In retrospect, this should be stressed as ideal-typical in approach. For instance, in practice, market-testing can be perfunctory. Franchisee self-financing is often supported significantly by loan finance from banks or other sources, including franchisors. Also, multi-unit franchisees and corporate franchisees that are found in some areas of Franchising such as fast food are clearly not always owned by small firm owner-managers. Indeed, some corporate franchisees may be larger than their franchisors measured by value of corporate assets, but in many areas small-scale ownership remains typical. Also, although the relationship is defined as a continuous one, the actual period covered will, of course, be variable. Some reference ought also to be made to the payment of fees or royalties of various kinds by franchisees to franchisors. But otherwise the definition embodies a gradually evolved consensus as the study of Franchising has developed. Occasionally, the definitional debate reemerges (see, for instance, Spinelli and Birley 1996), but otherwise is largely a feature of earlier research.

  Sign up to read

  Learn more about book
• 

  Available until 4 Feb |Learn more

  Be Your Own Boss

  • Bill McGowan(Author)
  • 2023(Publication Date)
  • Austin Macauley Publishers

    (Publisher)

  There is also strong evidence of increasing interest in the Local markets by overseas franchisors. Just walk into any shopping centre and every second outlet you see will a Global Franchise Brand. The name that springs to most people’s minds when thinking of Franchising is McDonalds.

  Franchising Is Big Business

  It is estimated that some thirty-five thousand plus franchise companies operate worldwide with approximately four million franchisees. Global sales contributed to Franchising exceed US$3 trillion and some 32 million people are involved in the franchise industry.

  The growth and development of Franchising has been a global mega trend.

  The following table indicates the penetration of Franchising into many developed economies based on information extracted from statistics provided by the World Franchise Council in 2011. (Note: sector employment figures are predominantly from a 2004 WFC Survey, and are therefore significantly understated.)

  A franchise (or Franchising) is a method of distributing products or services involving a franchisor, who firstly establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisors name and system. The Contract signed between the two parties is the “Franchise Agreement” that refers to the actual business that the franchisee will operate.

  There are basically two different types of franchise relationship:

  • Business Format Franchising is the type most recognised. In a business format franchise, the franchisor provides the franchisee with its trade name, products or services and the entire operating system for the business. The operating system includes site selection, operations manuals, trademark usage standards, quality control, training, IT systems, marketing and sales strategies, along with business advisory support from the franchisor. This is a system where the franchisor permits and obliges the franchisee to use his trademark/trade name and business service. This is the most common form of all franchises throughout the world and includes such examples as: Budget Rent a Car, Pizza Hut, Fastway Couriers, Holiday Inn, VIP, Jim’s mowing, Hungry Jacks, Australia Post, Clark Rubber, Pack and Send, Just Cuts, 7 Eleven, Marriott Hotels, Signs Express, McDonalds, Perfect Pizza, Subway, Autobarn, to name just a few.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The SAGE Handbook of International Marketing

  • Masaaki Kotabe, Kristiaan Helsen, Masaaki Kotabe, Kristiaan Helsen(Authors)
  • 2009(Publication Date)
  • SAGE Publications Ltd

    (Publisher)

  This is an ongoing relationship between the franchisor and franchisee that, in addition to product, service, and trademark, provides the fran-chisee with the entire concept of the business (Curran and Stanworth 1983; Elango and Fried 1997; Tracey and Jarvis 2007). Licensing Licensing is a market-based alternative that permits firm innovations to be profitable (Fosfuri 2006). Typically, research and development ideas, inventions, formulas, technological know-how, services, brands, art, music, designs and trademarks are what are licensed by a firm (Glazer 1991; Mottner and Johnson 2000). In exchange for these assets, the licensee typically provides the licensor with a lump-sum payment, and/or a royalty fee per unit, and a commitment to follow the licensing contract (Hill et al. 1990). Firms lacking production and market-ing capabilities are the most prone to engage Franchising AND LICENSING 185 Table 9.1 Five Franchising strategies Strategy Description Sole venture Franchisor wishes to use a pilot franchise to aggressively promote the franchise trademark, do market research, modify products and/or adapt services to the local market. Multi-unit Franchisor allows a franchisee to own multiple franchise outlets - divided into incremental and master Franchising. Incremental Franchising occurs when the franchisor allows a successful franchisee to operate additional franchise units. Master Franchising is where the franchisor agrees to let the franchisee own several franchisees in a specific geographic location from the time the contract is formed. Conversion Franchising Expansion of franchise units by employing independent business owners or competitor franchisees. Product and trade name Franchisee adopts most business operations from the franchisor in order to sell goods produced by the franchisor.

  Sign up to read

  Learn more about book
• 

  No longer available |Learn more

  Distribution, Retailing, and Wholesaling

  • (Author)
  • 2014(Publication Date)
  • White Word Publications

    (Publisher)

  ____________________ WORLD TECHNOLOGIES ____________________ Chapter 6 Franchising A McDonald's franchise. Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-French derivation - from franc - meaning free, and is used both as a noun and as a (transitive) verb. For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods and avoid investment and liability over a chain. The franchisor's success is the success of the franchisees. The franchisee is said to have a ____________________ WORLD TECHNOLOGIES ____________________ greater incentive than a direct employee because he or she has a direct stake in the business. Except in the US, and now in China (2007) where there are explicit Federal (and in the US, State) laws covering franchise, most of the world recognizes 'franchise' but rarely makes legal provisions for it. Only Australia, various provinces within Canada, France and Brazil have significant Disclosure laws but Brazil regulates franchises more closely. Where there is no specific law, franchise is considered a distribution system, whose laws apply, with the trademark (of the franchise system) covered by specific covenants. Overview Businesses for which Franchising works best have the following characteristics: • Businesses with a good track record of profitability. • Businesses which are easily duplicated. As practiced in retailing, Franchising offers franchisees the advantage of starting up quickly based on a proven trademark, and the tooling and infrastructure as opposed to developing them. The following US-listing tabulates the early 2010 ranking of major franchises along with the number of sub-franchisees (or partners) from data available for 2004.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  EU Distribution Law

  • Joanna Goyder(Author)
  • 2011(Publication Date)
  • Hart Publishing

    (Publisher)

  5.1.2 What is Treated as a Franchise under EU Law? The word ‘franchise’ is sometimes (particularly in the United States) used in a wide sense more or less synonymous with distributorship. 1 It is not a technical legal expression, but in Europe the word generally connotes something along the following lines. It is a distribution method adopted by a manufacturer or supplier who has developed a well-known name and appearance for his product (usually involving knowhow and intellectual property rights). The supplier may manufac -ture the goods itself, or he may simply select goods produced by a third party. In the latter case the franchise may be described as a ‘business format’ franchise, since it is essentially a business format that is being exploited. In either case, the supplier will probably also have established an ‘image’ for his sales outlets, connected with the physical appearance of the outlets and the business methods applied. These names, trademarks and ‘images’ will be known by the public and attract customers who recognise these familiar signs. Service franchises, such as photocopy shops and hairdressing salons, are also a type of business format franchise. In order to capitalise on this public recognition and on the package of intellec -tual property and business knowhow it has created, the supplier (the franchisor) may license another, completely independent, person (a franchisee) to use the package. In return for the licence, it will demand royalties and maybe a lump sum. The franchisee will in return have the benefit of opening his outlet on the basis of a name and appearance readily recognisable to consumers, and on the basis of the franchisor’s business knowhow. Thus, a franchise is often attractive to an individ -ual with little or no experience or reputation in the business but with a small amount of capital (perhaps a redundancy payment) to buy the franchise .

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Franchise Management For Dummies

  • Michael H. Seid, Joyce Mazero(Authors)
  • 2017(Publication Date)
  • For Dummies

    (Publisher)

  Part 1

  Wrapping Your Brain Around Franchising

  IN THIS PART … Explore a bit of the surprising history of Franchising and get to know the roles of franchisor and franchise. Check out the different kinds of franchised businesses and Franchising arrangements. Understanding the similarities and differences between entrepreneurship and Franchising to see if Franchising is right for you Dive into a franchisor’s mandatory legal obligations to prospective franchisees, the franchise disclosure document (FDD), and working with franchise professionals. Passage contains an image Chapter 1

  The Power of the Brand

  IN THIS CHAPTER

  Exploring the history of Franchising

  Defining a franchise and the roles of franchisor and franchisee

  Getting to know franchise wannabes, and why should you avoid them

  Understanding the rights you will be granted under a franchise agreement

  Three constants have fueled the growth of Franchising over its long history: the desire to expand, the limitations on human and financial capital, and the need to overcome distance. Although you may think of Franchising mostly in the context of your neighborhood fast food outlets, Franchising has transformed how we purchase products and services today. More than 120 distinct industries use Franchising today, and because of that it is nearly impossible to drive down any major street in the world and not pass by some business that is part of a franchise network. This chapter begins your exploration of Franchising, not by looking at any particular franchise but by giving you some of the basics so you can better understand what Franchising is all about.

  Tracing the History of Franchising

  Franchising seems ageless and omnipresent. It is used commercially today in over 120 industries to deliver to us all types of products and services in a way that allows us to trust in the consistent quality of the franchisor’s brand. It is also now being used by social enterprises such as nongovernmental organizations (NGOs) to bring fresh water, healthcare, education, electricity, and countless other products and services internationally to people living in underdeveloped parts of the world.

  Sign up to read

  Learn more about book