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Franchising (Characteristics of franchising (Franchise agreement is a…
Franchising
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Costs to the Franchisee
Franchise fee
An initial lump sum payment to franchiser to secure the right to use the name/formula of business for 10 years(renewable)
All costs(shops, furnishing,stock etc) borne by the franchisee,
If franchiser assists with set-up, it is known as a turn key operation, and the franchiser will charge a management fee for the service
Royalties(5-10% of turnover) are paid to the franchiser. Smaller franchise operations often charge a flat rate to facilitate ease of administration
A monthly advertising levy(subscription) is paid by the franchisee as his contribution to advertising done by the franchiser
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A marketing system where the Franchiser(supplier/mother company) enters into an agreement with the franchisee(distributor/individually owned business) to distribute the product/service on certain agreed upon terms