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Topic 6: Franchising and the Entrepreneur - Coggle Diagram
Topic 6: Franchising and the Entrepreneur
Definition of franchising: Franchising is a system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services.
Types of franchising
Product distribution
A franchisor licenses a franchisee to sell its products under the franchisor’s brand name and trademark through a selective, limited distribution network.
Pure
A franchisor sells a franchisee a complete business format and system.
Trade-Name
A franchisee purchases the right to use the franchisor’s trade name without distributing particular products exclusively under the franchisor’s name.
Benefits of Franchising
National advertising programs
Financial assistance
Standardized quality of goods and services
Proven products and business formats
Brand name appeal
Centralized buying power
Management training and support
Site selection and territorial protection
A business system
Greater chance for success
Drawbacks of Franchising
Contract terms and renewal
Unsatisfactory training programs
Limited product line
Restriction on purchasing
Market situation
Strict adherence to standardized operations
Less freedom
Franchise fees and ongoing royalties
Ten Myths of Franchising
All franchises are the same.
I don’t have to be a hands-on manager. I can be an absentee owner and still be very successful.
4.I’ll use 80 percent of the franchiser’s business system, but I’ll improve upon by substituting my experience and know-how.
Anyone can be a satisfied, successful franchise owner.
3.The bigger the franchise organization, the more successful I’ll be.
Franchising is the cheapest way to get into business for yourself.
2.I’ll be able to open my franchise for less money than the franchiser estimates.
9.The franchiser will solve my business problems for me; after all, that’s why I pay an ongoing royalty fee.
1.Franchising is the safest way to go into business because franchises never fail.
Once I open my franchise, I’ll be able to run things the way I want to.
The Right Way to buy a franchise
Get a copy of the Franchisor's FDD
Talk to existing franchisees
Consider your franchise options
Ask the franchiser some tough questions
Research your market
Make your choice
Evaluate yourself: What do you like and dislike?
Trends shaping franchising
Conversion Franchising
Refranchising
Smaller, nontraditional locations
Intercept Marketing
Multi-unit franchising
International Opportunities
Area development and master franchising
Changing face of franchisees
Co-Branding