FRANCHISING: AN EMERGING GLOBAL TRENDSTeacher – Shahed Rahman
FRANCHISING SYSTEM Franchising is a vertical
marketing system in which one firm ( The franchisor) provide another individual or firm ( the franchisee), for consideration, a license privilege to do business in a specified geographic area, along with assistance in organizing training, merchandising, and managment
CONSIST OF THREE RELATIONSHIPS Legal Relationship
The contract between the franchisor or franchisee The responsibilities and obligation
Business Relationship Day to day activities necessary to provide
acceptable products and service to customers Franchisee operates the business under the
franchisor’s trade name or marketing plan Nonbusiness Relationship
Forward looking, cooperative association that exist between two independent channel members
Success is tied directly to the success of other Interrelated intrinsically to one another
FRANCHISING SYSTEM Franchising Systems consist of network of
franchisors and franchisees With in this system franchisees receives the
training, guidance, preparations necessary to use trade secrets, operational procedures.
BENEFITS OF FRANCHISING Developing the business with less cost Independent owner Rapid market penetration Franchisors do not need to motivate
franchisee – as they are the owner of the company
Franchisees get an extensive support from franchisors.
Proven product o service concept Recognizable brands Standardized methods for operations
TYPES OF FRANCHISING Tied-house Franchising Systems
First generation franchising German brewers in the 18th century contracted with
tavern to sell their brand of beer exclusively Product/Trade name Franchising
Second generation appeared during the 19th century Singer sewing machine company elected the sales
people to sales its product Distribute a product under franchisor’s trademark
Business Format Franchising 20 th Century by A&W Replicate a complete business concept including
product or service.
CONCERN OF FRANCHISEES Franchising not always confirm profit When contract is over the franchisor can
pass to another entrepreneur. Open another store or franchise near your
store Independence level Some franchisor just do it for market entry Franchisor collect promotional money from
franchisees
CONCERNS OF FRANCHISORS Franchisees who decides to buy supplies or
equipments from independent sources. Effect franchisors profitability Royalty fees to franchisors Reporting their gross sales honestly Franchisees can hide some of the incident
what is bad for the company. Not following the marketing strategies.
RELEVANT TRENDS IN FRANCHISING ENVIRONMENT Social, Cultural and Demographic Trends Economic Trends International Trends Industry Trends
INTERNAL ENVIRONMENTAL FACTORS Conflicts in Franchising
Upfront Fees Tying agreements Capricious Termination
Lack of security since franchisors can terminate agreements or fail to renew them at the end of pre specified period Expiration of the term of the contract Franchisee bankruptcy Some default in franchisee’s performance
Encroachment Lack of Cooperation
PROTECT YOURSELF BY …. Self Evaluation Investing the franchise Studying the disclosure document Checking out the disclosure Questioning earning claims Obtaining professional advice Knowing your legal rights
CURRENT LEGAL STANDARDS IN FRANCHISING Disclosure
FTC Rule 436 Mandatory Purchases from the
Franchisor Termination and Renewal Advertising and Promotions Percentage you have to pay for
promotion Expansion
Franchisor constantly think of expanding into the market that is already being served
MAKING FRANCHISE RELATIONSHIP WORK
Strategic Franchise Partnerships Mutual responsibility Communicating up and
down Franchisees as customers Leadership and attitude
Creating a climate for open communication
Commitment to mutual goals Achieve those goals require
leadership