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Franchising Essay

575 words - 3 pages

RISE AND FALL OF FRANCHISING

Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company's products and services can help them. It is a method for distributing products and services that satisfy customer needs. Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company's products and services can help them. It is a method for distributing products and services that satisfy customer needs.

There are three basic types of franchises:

Product Franchises. 
Manufacturers use the product franchise to govern how a retailer distributes their product. The manufacturer grants a franchisee the authority to distribute goods by the manufacturer and allows the owner to ...view middle of the document...

The franchisee pays a fee or royalty in return. Examples of Business Format Franchises include: McDonalds, Dunkin Donuts, Carvel, AMMCO and Fantastic Sam’s.
Manufacturing Franchise. 
These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor's name and trademark. This type of franchise is found most often in the food and beverage industry, but can be applied to other industries. Examples of Manufacturing Franchises include: Coca-Cola, and Sealmaster.
Advantages
* 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 ongoing 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.

Disadvantages
* 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 restrictionson 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.

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