Transcript SMALL BUSINESS MANAGEMENT Chapter 6 Franchising

SMALL BUSINESS
MANAGEMENT
Chapter 6
Franchising
History and Background of Franchising
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Most rapid growth in North America
since the 1950s.
1960s: Franchisee associations
formed and legislation to protect
rights of franchisees and
franchisors.
More than 40% of all retail sales
resulted from franchising in North
America in the last decade.
What Is Franchising?
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Manufacturer-Directed Franchise
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Wholesaler-Retailer-Directed
Franchise
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Franchising Company
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Franchising Terms
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An entrepreneur whose power is limited
by a contractual agreement with a
franchisor
Franchisor
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The party in the ____________
contract that specifies the methods to
be followed and the terms to be met by
the other party
Franchising Terms
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Product and Trade Name Franchise
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Business _______ Franchise
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Grants the right to use a widely recognized
product or name
Provides an entire marketing system and
ongoing guidance from the _______
Piggyback Franchising
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The operation of a retail franchise within the
physical facilities of a host store
Reading the Fine print
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Briefly discuss the advantages and
disadvantages of franchising that
are identified in this example.
What could prospective franchisees
do to reduce the risks of the
problem identified in this example?
Advantages of Franchising
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Proven _______ for the product or
service.
Services the Franchisor May Provide
1. Selection of _______
2. Purchase or Construction of Site,
Buildings, and Equipment
3. Provision of _______
Advantages of Franchising
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Services the Franchisor May Provide
(cont.)
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5.
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Standardized _______ of Operating
Advertising
Purchasing _______
Training
Potential Disadvantages of Franchising
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Lack of _______
Cost of the Franchise
Unfulfilled _______
Restrictions of the Contract
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Product or Service Offered
Line Forcing
Termination
Potential Disadvantages of Franchising
(cont)
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Saturation of the _______
Lack of Security
Cost of _______
Effectiveness of Promotion
Exaggeration of _______ Success
Evaluation of a Franchise Opportunity
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Franchisor
Industry _______
Professionals
Other Franchisees
Government Agencies
Additional _______ to Investigate
The Entrepreneur as Franchisor
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What businesses can be franchised?
The Entrepreneur as Franchisor
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How does one become a franchisor?
1. Establish a prototype.
2. Prepare the necessary information.
3. Investigate the legal requirements.
4. Develop a planned and standardized
program of operations.
5. Obtain adequate financing.
Franchising in the Future
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“Piggybacking”: Two or more
franchise operating in one outlet.
“Branchising”: Converting existing
chain outlets to franchises.
“Mini-franchises”: Small satellite
versions of larger franchises.
Growth of service-based and homebased franchises
Franchising Frauds
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The Rented Rolls Royce Syndrome
The Hustle
The Cash-Only Transaction
The Boast
The Big-Money Claim
The Couch Potato’s Dream
Location, Location, Location
The Disclosure Dance
Appendices
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A. A Sampling of Franchises Operating
in Canada
B. Trade Associations and Government
Departments that Assist Franchisors
and Franchisees
C. A Checklist for the Potential
Franchisee; Questions to Answer
Affirmatively before Going into
Franchising
D. Franchise Contract Clauses