 Franchise - Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name.  Franchisee – the person/business that agrees to distribute the product/provide the service under licence from the franchisor  Franchisor – the business that gives the franchisee the right to distribute or provide its service.

 Understand the principles of franchising and how it applies to small business start up,  Appreciate the advantages and disadvantages of using a franchise as a means of starting a new business,  Assess Franchising against other start-up options,  Identify a suitable start-up location.

 Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. The franchisee usually pays a one-time franchise fee plus a percentage of sales revenue as royalty Read more: ixzz25nlOVlpB

 (1) immediate name recognition,  (2) tried and tested products,  (3) standard building design and décor,  (4) detailed techniques in running and promoting the business,  (5) training of employees, and  (6) on-going help in promoting and upgrading of the products. The franchiser gains rapid expansion of business and earnings at minimum capital outlay.

 Your business is based on a proven idea. You can check how successful other franchises are before committing yourself.  You can use a recognised brand name and trade marks. You benefit from any advertising or promotion by the owner of the franchise - the 'franchisor'.  The franchisor gives you support - usually including training, help setting up the business, a manual telling you how to run the business and on-going advice.  You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same territory.  Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.  You can benefit from communicating and sharing ideas with, and receiving support from, other franchisees in the network.  Relationships with suppliers have already been established.

 Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor.  The franchise agreement usually includes restrictions on how you can run the business. You might not be able to make changes to suit your local market.  The franchisor might go out of business.  Other franchisees could give the brand a bad reputation, so the recruitment process needs to be thorough  You may find it difficult to sell your franchise - you can only sell it to someone approved by the franchisor.  All profits (a percentage of sales) are usually shared with the franchisor.

Location is very important to the success of most businesses. Toni&Guy or Subway for example carefully choose new locations for its business. The location has to be somewhere busy in the centre of a town where customers can ‘pop in’. The same is true of any retail business.

 Communications  This includes transport facilities (road, rail, air) as well as information infrastructure. Transport links are particularly important if the business delivers products, sells direct using a sales force or is dependent on import and export. Information technology is less of an issue these days – most start-ups can quickly establish reliable broadband Internet connections.  Labour  When a start-up needs to hire employees, then access to a reliable pool of staff with relevant skills is important. Businesses that are labour-intensive often look to locate in areas of traditionally low wages.  Market - customers & population  A start-up may need to be located near particular centres of population. For example, if the product is a service targeted at affluent older-aged people, then it is important to be located where there is a sufficient population of such people. Franchise businesses often analyse the population characteristics of a potential new territory before setting up in a new location.  Suppliers  The business may be dependent on supplies of a particular raw material, so costs will be lower if the business is located near the source of supply (e.g. where the raw material is grown or where a distributor is based). This factor tends to be more important for manufacturing businesses rather than service businesses.  Government assistance  Government policy has often been designed to influence the locations of new businesses. If the start-up is “location-independent” (i.e. the other factors above don’t really make a difference to the choice of location), then it may be that deals and incentives offered by Government can influence the choice. Some poorer areas of the UK are designated as “assisted areas”. These include many parts of north-east England, Wales, East Yorkshire, Cornwall etc. Locating a new business in one of these areas potentially makes government grants and loans available.

 What is the best location for:-  A shop selling skis, snowboards and cold weather gear? Explain why?  A large distribution centre owned by Sainsburys? Explain why?  A mobile sandwhich van, selling burgers, drinks and snacks? Explain why?

 This section of the course work just needs to recap the other types of start up that were covered in the ‘Types of Business Ownership’ earlier.  It only needs to be a recap

 What is a Franchise?  How does it work?  List 2 advantages,  List 2 disadvantages,  Name three other types of business ownership.  HWK – ‘overtou hwk franchising’