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Topic 6: Franchising & the Entrepreneur - Coggle Diagram
Topic 6: Franchising & the Entrepreneur
Definition
Franchising
- a system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchisor) in return for the right to become identified with its trademark, to sell its products, or services, and often to use its business format and system.
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
Standardised quality of goods and services
Proven products and business formats
Brand name apeal
Centralised buying power
Management training and support
Site selection and territorial protection
A business system
Greater chance for success
Drawbacks of Franchising
Limited product line
Contract terms and renewal
Restrictions on purchasing
Unsatisfactory training programs
Strict adherence to standardised operations
Market saturation
Franchise fees and ongoing royalties
Less freedom
Ten Myths of Franchising:
Franchising is the safest way to go into business because franchises never fail.
I'll be able to open my franchise for less money than the franchiser estimates.
The bigger the franchise organisation, the more successful I'll be.
I'll use 80 percent of the franchiser's business system, but I'll improve upon by substituting my experience and know-how.
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.
Anyone can be a satisfied, successful franchise owner.
Franchising is the cheapest way to get into business for yourself.
The franchiser will slve my business problems for me; after all, that's why I pay an ongoing royalty fee.
Once I open my franchise, I'll be able to run things the way I want to.
Factors that Make a Franchise Appealing
Business system that works
Solid training program
Registered trademark
Affordability
Profitability
Positive relationship with franchisees
Unique concept or marketing approach
The Right Way to Buy a Franchise
Get a copy of the Franchisor's FDD and read it
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, non-traditional locations
Multi-unit franchising
International opportunities
Area development and master franchising
Changing face of franchisees
Co-branding