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Franchising MST (Topic 4: Franchising Support Services (Describe the…
Franchising MST
Topic 4: Franchising Support Services
Describe the value of franchisor training
Staff Training
Implications of poor staff training (examples)
Low morale
Costly mistakes
Lower productivity
Unsure of what to do
Advantages
Improved productivity
Retain customers
Decrease errors
Develop potential to increase sales and reduce costs
Increase likelihood of employee staying with the company in the long-term
Describe the training programme required for franchise
Training Manual and Programmes
Facilitates interaction between franchisor and franchisee
Training Programmes
Formal
Administrative Functions
Operating Functions
Usually at a training site
Ongoing
Provided by field staff
After entering the business
Training and Provision for Management System and Standards
On all aspects of operating and managing the business
Operating Manual: Look up in "Operations Package" above
Identify support services provided by a franchisor to franchisee
Promotional Package
Provide basic information about the franchise
Solicit franchisees to the franchise system
Illustrate follow up forms used to sign the franchisees
Description of the business
Background Info of the franchisor and the franchised company
Assistance offered by franchisor to franchisee
Amount of money required for acquisition of a franchise
Financial Info about franchisees and the franchise system
site, equipment and building info
marketing factors associated with promotion and sale of the franchise system's products and services
Operations Package
Operating Manual
Instructional Tools for training new franchisees
Essential admin, legal and functional aspects
Each major function and operating procedure of the business
Step-by-step explanations of operations
Uncertainties of day-to-day operations
Training Manual
Location Selection Criteria
Marketing Manual
Advertising Manual
Field Support Manual
Quality Control Manual
Pre-opening Manual
Site Inspection Manual
Reporting Manual
Describe the marketing support system to the franchisees (sales and marketing plans)
4Ps
Topic 5: Development of a Franchise by Franchisor
Reasons why franchisor develop/expand using franchising (refer to Topic 1, Advantages, For Franchisor)
Describe management systems in Operation and Training
Must be..
carefully planned
clearly articulated
accepted by the network of franchisees
consistently applied
rigidly enforced by franchisor
Consists of...
Required and authorized products to be sold
Manner in which these franchisees may offer and sell
Required image and appearance of facilities, vehicles and employees
Designated and approved suppliers, supplier approval procedures & criteria
Sales, marketing, advertising, and promotional programs and the materials and media used in these programs
T&Cs of the sale/delivery of items that franchisee acquires from the franchisor
Importance of quality standards and quality controls to a franchise system
Increased goodwill
Most effective utilisation of resources
Reduction in production cost
Higher morale of employees
Satisfaction of consumers:
Increased Sales
Encourages quality consciousness:
Topic 1: Concepts of Franchising
It refers to a business opportunity by a franchisor who has developed a system of running a business successfully, licenses the rights to operate the service or a trademarked product and grants exclusive rights to the franchisee
Pros and Cons of Franchising
Advantages
For Franchisee
Tried and Tested System
Technical and Managerial Assistance
ongoing support and assistance in managing day-to-day operations
technical assistance provided, eg. site selection, store layout, design
property; franchisor can negotiate for advantageous terms
franchisor provides necessary instruction to operate the franchise
Quality Control Standards
Established Service, Recognised Brand Name
No previous experience required
Important attributes: motivated, willing to learn, obedient to franchisor's instructions
Some franchisors prefer franchisees with no prior experience in their particular business field
Training for Franchisee and Management Team
Research and Development of New Products and Services
Buying Power
Economies of Scale
Better funding
Opportunities for Growth
For Franchisor
Smaller Head Office Preparation
Expansion
Achieve more rapid market penetration at a lower capital cost
Franchisor is free to use part of the company's capital (put in by the franchisee) for purposes other than expansion, eg. R&D
Allows business to expand with limited risk, capital and equity investment; faster growth network internationally and domestically
Leveraging on the investment of others.
Improved Customer Service
Use power of franchising system to build customer loyalty, eg. new franchise opened up nearby = faster delivery times
Increased market share and brand equity
Reach target consumers more effectively through cooperative marketing and advertising (through franchisees)
Selling products and services to a dedicated distributor network (franchisee network)
Motivated Franchisees
Franchisees try to increase sales and profitability, resulting in improved customer service and overall company image
Replace the need for internal personnel with motivated individuals
Franchisee more motivated that company-employedmanager
Bulk Purchasing
Obtain operating efficiencies and economies of scale (results in greater profits, without even using franchisor's capital)
Economies of scale can be easier achieved
Disadvantages
For Franchisor
Loss of Freedom
Difficult for franchisor to modify/add/remove products
Franchisor stands to lose a substantial amount of control as franchise system expands.
Different Management Style
Franchisor has to treat franchisees like customers, not employees
Recruitment
franchise candidates may lack the experience, motivation or proper capital backing needed
Communication
Communication issues may arise between franchisor staff and franchisees, eg. misunderstandings, personality differences
Franchisee may develop a sense of independence, and no longer feel a need to reply to the franchisor
For Franchisee
Non-guaranteed long-term ownership
Restriction of Freedom of Ownership
Have to operate according to franchisee agreement, eg. procedures, policies, restrictions, pricing, geographic territory
A damaged, system-wide image
If franchisor does not provide services as promised, it could affect the franchisee's business
If other franchisees perform badly, this may reflect negatively on the franchisee
Ongoing fees/Service Costs
Initial franchise fee, royalties, advertising fees
Have to share profits earned with franchisor (remits a required percentage)
Long, unsocial working hours
Overdependence
May fail to apply critical thinking and solve problems on their own, with the use of knowledge of the local customers
May become too dependent on franchisor's advice eg. on changing market conditions, crises
Topic 3: Evaluation of a Franchise
Evaluations
Analyse the franchisor's financial projection
Comprehend the franchise business
Financial Aspects of Franchise
Training and Support Matters
Background and Reliability
Franchise Agreement
Assess the individual assessment opportunity
Carefully examine disclosure document to ascertain claims made by the franchisor concerning income, sales etc.
Wise to obtain independent professional assistance in reviewing and evaluating the franchise (esp on financial statements provided)
Examine the top warning signs in franchise investment
Review franchise financial statements with an experienced accountant
Poor validation from existing/previous franchisees
Franchise has undergone excessive legal proceedings/lawsuits
representative of the franchisor is providing information that differs from the Franchise Disclosure Document
Explain the franchise assessment questionnaire
Analyse the self in relation to the choice of franchise
Franchisee must understand his business strengths and the management skills necessary needed to run the business
Franchisee is not only replying on the performance record of the company, but also on his personal experience, business skills and attitude for a franchise ownership
Analyse the industry and the franchisor
Track records of industry (eg. blue-chip, fast food restaurants VS technology companies)
External Factors; franchisor must monitor environmental factors which may pose major threats to the franchised business and its products so that franchises can accommodate changes
Comparing other shops in the same industry
Preparation of Business Plan
Topic 2: Factors Affecting Franchise Evaluation
Factors that underlie Franchising Success
Uniqueness
Proprietary product and quality, giving product the elusive age
Have intellectual property rights protection
Strong USP
Right team of franchisees
Franchisees must have high success rates eg. through interviews, aptitude tests
Franchisees must be happy with their investments
Long life-cycle demand must be sustainable
Not a passing fad
Growing demand in the future
Year-long demand
Enough demand in your designated location
Strong Corporate Image
Reputation for quality
Franchisor has experience in the business long enough to establish business strength
The product/service or the franchise model can be easily duplicated
Simple and Scalable
Can be easily followed by future franchisees
Ensures ease of consistency in training, marketing etc.
Good administrative and operation system for quality control
Supervision/Quality Control
Regular visits by field staff