(Finance, Accounting, Taxes & creative knowledge)
The
nature of franchising
A
franchise is the right given by a business to someone who will sell the business‘s
product using the business name. The franchisor (the business) grants a license
to the franchisee (the person operating the outlet), allowing the franchisee to
trade using the franchisor’s name. the franchisee sell the franchisor’s product
(goods or services), and is supported by the franchisor’s business expertise,
in return , the franchisor receives an initial payment from the franchisee and
is then paid a regular fee usually based on a percentage of the turnover
(sales) or profits that the franchisee makes.
The
franchisee owns and controls the business outlet, and the franchisor keeps control
over the way the way the products are marketed and marked and sold, and
controls the quality and standards.
The
benefits of franchising
For the franchisee, Compared with setting up a
new business ‘from scratch’…
*a
new idea is not needed, whereas someone setting up a new business must have an
idea for a new product.
*the
product is already nationally known and is successful; with a new business,
neither the product nor its change of success is known
*the
franchisor has a good trading name and might pay for national advertising
campaigns; with a new business the owner would have to advertise (locally
rather than nationally)and dose not as yet have a recognised business name
*franchisors
normally offer training programmes in business skills; new business owners need
to arrange this for themselves.
Other
advantage to the franchisor include……
*possible
help from the franchisor to obtain the finance to set up the franchise
*benefits
from being part of a large organisation, not only in advertising and training,
but also in marketing, product development and management services.
There
are drawbacks to the franchisee of running a franchisee of running a franchise
rather than owning the business outright. The initial costs are high, and
payments such as interest on money borrowed will eat into profits. The
franchisee is never in full control because the franchisor decides aspects of
the business, such as what products are to be sold and how and where much of
the adverting takes place.
Key
Words:
*People
are increasingly moving into franchising over setting up businesses from
scratch –safe in knowledge that they will be operating under a well-established
and trusted brand.’
*Franchising
decreases the risk of business failure because the franchisee is maintained by
the successful business record of the franchisor.
*It
is the right given by a business to someone who will sell the business‘s
product.
*
sell the business‘s product using the business name of franchisor.
*
Franchisor has been (the business) grants a license.
*
The franchisee has the person operating the outlet.
*
Franchisee to trade using the franchisor’s name.
*
Franchisor receives an initial payment from the franchisee.
*
Franchisor payment will be regular fee usually based on a percentage of the
turnover (sales) or profits that the franchisee makes.
*
Franchisor keeps control over the way the way the products are marketed and
marked and sold, and controls the quality and standards.
Franchise
Relationship
|
The
Franchisee outlet |
|
The franchisor |
|
works |
|
employs |
|
sells |
|
supplies |
|
Shares
profits |
|
Shares profits |
Good
ReplyDelete