CLAIRE BALDERSON Franchising

What is Franchising? Franchising is a business strategy for getting and keeping customers. Franchising is a marketing system for creating an image for the customers about how the products or services can help them. Franchising is a strategic alliance between groups of people whose main goal is to dominate the markets. Franchisers want to get and keep more customers than their competitors. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

What is Franchising Continued Franchising is a network of interdependent business relationships that allows people to share things such as: 1. A brand identification 2. A successful method of doing business 3. A proven marketing and distribution system Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Types of Franchises Home-Based Franchises: Offers less stress of commuting, lowering expenses such as gas, lower start up costs, and gives extra time for family. Can feel isolated. E-Commerce in Franchising: Expanding businesses online and opening virtual stores appeal to a larger audience. Franchisees can make a choice between starting just an online business or a business requiring a store front. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Types of Franchises Continued Technology in Franchising: Social media extends the brands to their customers and franchisees. Technology expands their businesses by reaching out to a larger audience. Global Markets: Putting businesses in several different countries opens up more language barriers. Convenience and level of service/quality are main factors in being successful globally. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Alternatives to Franchising Distributorship: The distributor usually has a contractual relationship with the supplier. Buys from the supplier in bulk and sells in smaller quantities. Is familiar with local markets and customers. May do business with many companies. A distributor may be subject to many controls by the supplier/producer and look like a franchise. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Alternatives to Franchising Continued Licensing: Allows a licensee to pay for the rights to sue a particular trademark. Licensors are mainly interested in collecting royalties and supervising the use of the license, instead of influencing the operations of the business. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Advantages Management and Marketing Assistance: A franchise has a much greater chance of succeeding because of the established product to sell, helping choose a location, and assistance in all phases of promotion and operations. Some franchisers help their franchisees through local marketing rather than having them depend only on national advertising. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Advantages Continued Personal Ownership: A franchise operation is still your business, and you enjoy as much of the incentives and profit as any sole proprietor would. You are still your own boss, but you simply have to follow a few more rules, regulations, and procedures. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Disadvantages Large Start-Up Costs: Most franchises demand a fee for the rights to the franchise. Most start up costs are very expensive. They can range from a few thousand all the way to millions of dollars. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Disadvantages Continued Management Regulation: Management “assistance” tends to become more of managerial orders, directives, and limitations. Franchisees may lose their drive to run their own business because they feel burdened by the company’s rules and regulations. Franchisees will often get together to resolve problems with franchisors rather than doing it alone. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Fees Almost all franchises have monthly or weekly feels called franchise fee, or more commonly called, royalty fee. This usually is a percentage of the gross sales revenue of the business. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Fees Continued Another fee that is commonly associated with franchising is the start up fee. Most start up fees are very costly and can discourage people from developing a franchise. Nickels, William G., James M. McHugh, and Susan M. McHugh.  Understanding Business. Boston: McGraw-Hill Irwin, Print.

Promotion/Advertising Regulations: Advertisements should not make any statement that is inconsistent with statements in the franchisor’s Franchise Disclosure Document. State laws prohibit franchisors from making any guarantees that the business will be profitable. Most states require that the name and address of the franchisor appear in the advertisement.

Promotion/Advertising Continued Advertising Agencies: Agencies help steer you through laws affecting advertising, but you need to make it clear that you own all the rights to your company. Laws to be Familiar: Trademark Law. Copyright Law. Trade Practice Laws. Misrepresentation Laws.

Franchise Business Procedures 1. Evaluate if your business is ready- there should be an expectation that more units will create increased profit. 2. Learn legal requirements- you must register a franchise disclosure document with the Federal Trade Commission. 3. Make important decisions about your business- the terms of the franchise agreement, size of each franchise, if products/equipment needs to be bought, etc.

Franchise Business Procedures Continued 4. Create paperwork- submit legal paperwork to authorities. 5. Hire- add several staff members who increase the productivity of the team. 6. Sell franchises- convince franchisees to buy your product. 7. Support franchisees- support franchising network through training programs.

Main Points of Franchising Franchising is an alliance between groups of people whose main goal is to dominate the market. There are home-based franchises and global markets, and technology and E-commerce is a major factor in franchising. Distributorship and licensing are some alternatives to franchising. Advantages of franchising are having managing and marketing assistance, and being the personal owner of your own franchise.

Main Points of Franchising Continued Disadvantages of franchising are the large start up costs and management regulations. Fees that are associated with franchising are the franchise/royalty fee and the start-up fee. When promoting franchises, you can do it through advertising agencies, but you have to think of the laws and regulations that go along with that. When starting a franchise, always remember the franchise business procedure, steps 1-7.