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Business Franchise

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by

Rachel Ferrero

on 30 October 2014

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Transcript of Business Franchise

Franchise
Type of Business Ownership
Examples
International example
-
McDonald’s :
- Number one company when it comes to having the largest number of franchises worldwide and delivering the most average income
- Franchisee must invest a minimum of $300,000, receive training, and actively work in the location
Benefits
Disadvantages
• High franchising and royalties
• Strict operating standards
• Purchasing restrictions
• Limited product line

Trends in Franchising
- Franchises reflect changes in market and market attitudes
Trends in market change franchise types such as shifting demographics, and exponential growth segments
Currently flourishing franchise markets include: recession-proof brands, “Green” businesses, fitness, health and personal care

Examples
Regional example
-
Bad Boy Superstore :
- Furniture, electronics, appliances, and mattresses franchise
- Locations include Scarborough, Mississauga, North York, Barrie, Kitchener, and Brampton
Purchasing Restrictions & Limited Product Line
Franchise owners must often buy their supplies from the parent company or from approved suppliers.
High franchising fees and royalties
A
franchise
is a type of business in which a franchiser sells to another person (franchisee) the rights to use their business name and vend their products and services for a limited time
Franchising
is the practice of using another firm’s successful business model.

A franchisee is the one that purchases a license from the business

Franchises are considered a hybrid type of business ownership
Franchisers charge high fees for the right to use the company name.
They also charge royalties
Franchiser and Franchisee
Starting a Franchise
Strict operating standards
franchises such as McDonald's provide the franchisee with location and all the equipment to start the business
Franchise owners must follow all the rules laid out in the franchising agreement for such matters as: hours of operation, operating procedures, and dress code
A franchise is one of the easiest types of businesses to start because the franchiser is usually responsible for the equipment
A franchisor does not exercise substantial or significant control over the day-to-day operations of its franchisee

The franchisee has sole responsibility

Franchises are like chain stores except without the liability and investment
Franchise
The word franchise comes from the Anglo-French word
franc
which means free
The Give and Take
A franchise is like a give and take situation
The franchisee receives permission to use the brand and products
However, they have to shoulder the heavy financial burden by themselves
Examples
National example -
Harvey's :
- Second-largest Canadian-established restaurant franchise, behind Tim Hortons
- The franchisee is usually charged a $25,000 one-time franchise fee, excluding property fees
- In order to fulfill niche markets, unconventional types of franchises are created
1. Third-Party Logistics Franchises
3PL: provides services to businesses that have decided to outsource
i.e. Integrated operation, warehousing, and transportation
2. Event Franchising
- same events in different area retaining the same brand, mission, concept and format
i.e. World Economic Forum, When the Music Stops
3. Home-Based Franchises
- franchising of a home-business model
home-businesses are becoming extremely popular due to technological advances

Standardized Quality
Financial Assistance
-provided with instant connections
-major financial advantage
Management Training and Support
-lasting supervision
-management techniques
-advertising
-training system
Interesting Facts
-A brand new franchise starts approximately every 8 minutes of each business day

-More than 75 different industries use franchising as a way to their distribute goods and services

-The top franchise industry currently is fast food

-There are above 78,000 franchises in Canada

-Approximately one out of every 12 businesses in the U.S. happens to be a franchise business

-The average initial franchise investment is approximately $250,000

To summarize...
A business franchise is a
semi-independent business that pays fees to a parent company
Franchisers help inexperienced owners gain the experience they need to succeed
Some franchisers provide financing to help franchise owners start their business
Most parent companies require franchise owners to follow certain rules and processes to guarantee product quality
National Advertising Programs
Parent companies pay for far-reaching advertising campaigns to establish their brand names
Centralized Buying Power
Franchisers buy material in bulk for all their franchise locations and pass out the savings to franchise owners
Full transcript