Understand the structure of the franchise industry.. Learn how to research franchise opportunities... Franchise—a business that markets a product/service developed by a franchisor
Trang 1Chapter 2
Franchising
Entrepreneurship and
Small Business Management
Trang 2Ch 2 Performance
Objectives
Define and describe franchising.
Identify the positive and negative aspects
of franchising.
Understand the structure of the franchise industry.
Recognize the legal aspects of franchising.
Learn how to research franchise
opportunities.
Explore international franchising.
Trang 3 Franchise—a business that markets a
product/service developed by a franchisor
Franchising—the system of operating a
franchise governed by a legal agreement
Franchisor—person or company who
develops/sells a franchise and specifies the terms and methods of the agreement
Franchisee—owner of a franchise unit or
territory rights
What Is Franchising?
Trang 4 Product and trade-name
franchising—licensing or production
of the product, and use of the franchise trade mark, logo, or identity
Business-format franchising—
purchase of an entire business model and system, including access to
management expertise
Main Types of Franchises
Trang 5 Master franchise—allows
individuals and organizations to buy the right to sub-franchise within a
defined geographic territory
Area franchise or multiple-unit
franchise—gives exclusive rights to
open franchisee-operated units within specific areas
Other Franchise Variations
Trang 6Positive and Negative
Aspects of Franchising
Advantages
Start-up assistance
Instant recognition
Purchasing power
Advertising and
promotional support
Operating guidelines
Record of success
Drawbacks
Constraints on creativity and freedom
Costs
Standards and obligations
Trang 7 A few large franchisors, with
worldwide franchisees, control most of the industry.
Many smaller franchisors have
local and regional franchisees.
U.S franchises provide over 9.5
million jobs.
Franchise Industry
Structure
Trang 8Additional Types of
Franchises
Internet franchise—”virtual” franchise
that is not dependent on a physical location
Conversion franchising—an existing
stand-alone business or local chain becomes part of a franchise operation
Piggybacking or co-branding—two
franchises share locations and resources
Trang 9Legal Aspects of
Franchising
State and federal regulations govern
franchises.
primary agency involved in oversight
—primary source of data for prospective franchisees regarding franchisors
between the parties in a franchise
Trang 10 Overview and background
Fees and costs
Contractual obligations
Territory
Financial performance
Data on existing units
Financial statements and contracts
Termination, renewal, and other
policies
Information Included in a FDD
Trang 11 Term of agreement (length of time)
Standards of quality and performance
Royalties
Non-compete, “hold harmless,” and
integration clauses; choice of venue
Clauses regarding termination,
renewal, and transfer of the franchise
Information Included in a
Franchise Agreement
Trang 12Steps for Franchise Selection
1 Take time to reflect and engage
core supporters.
2 Identify potential franchises.
3 Do research to narrow the list
of options.
4 Decide if to use a franchise
broker.
5 Visit and observe franchise
operator(s).
Trang 13Steps for Franchise Selection (continued)
6 Request preliminary information
from franchise companies.
7 Perform due diligence on a
specific franchise.
8 Explore financing options.
9 Make a decision, engage
professional counsel, and negotiate an agreement.
Trang 14 Opportunities exist worldwide.
The decision to go global is more
complex than domestic franchising.
Ethnic, cultural, and religious diversity impact business format and operations.
Policies must be altered for differences
in governing law and custom.
International Franchising