Significance of the study

This study is suitable for the college students taking business administration and / or other business related courses. It can, in fact, be used by anyone who is interested in engaging a business whether a first timer or has a business knowledge already. The contents are arranged in such a way that it will enable beginners to quickly learn how to operate a franchise business in the future. It is already provided with advance information and procedures that will help and experience them to become a franchisor or a franchisee in a glimpse on an eye reading this manuscript. And also, this will help them gain some knowledge and get interested in running an owned business.

State of the problem

Franchising is believed that it gives an enormous impact throughout the world in terms of economy. Thus, many businesses wanted to engage on it. And as an observer, it is difficult to us to find out its core importance to societys progress. But we are hoping that could gather information and facts dealing with this study. Specially, this study aims to answer the following questions: a) b) c) d) What is franchising? And how does it provide the countrys progression? What is a franchisee? A franchisor? Who is responsible in a franchise business? When can a franchisor grant a franchisee to operate his or her trademark / brand name?

What is franchising?

Franchising is the practice of using another firms successful business model. The word franchise is of Anglo French derivation from franc meaning free. For the franchisor the franchise is an alternative to building chain store to distribute goods that avoids the investments and liability of a chain. The franchisors success depends on the success of the franchisees. And the franchisee is said to have a great incentive than a direct employee because he or she has a direct stake in the business. Mid sized franchises like restaurant, gasoline stations and taking stations involve substantial investments and require all the attention of a business person. There are also large franchises like hotels, spas, hospitals, etc; Two important payments are made to a franchisor: a) A loyalty for the trademark b) Reimbursement for the training and advisory service given to franchisee. These two fees may be combined in a single management free. Which a free for disclosure is separate and is always a front end fee. A franchise is usually lasts for a fixed time period in which each are required for renewal, serves a specific territory or geographical area surrounding its location. A franchise can be exclusive, non exclusive or solve and exclusive. A franchise based on dictionary means granting authorization to someone to sell or distributed a companys goods or services in a certain area or certain places. It is a license granted by a company or firm on certain terms and conditions to and individual or firm to operate a retail outlet in a specified area or place. A franchise is merely a temporary business investment involving renting an opportunity, not the purchase of a business for the purpose of ownership. On is legal terms, franchise is considered as a contract in which the franchisee is usually granted an exclusive territory products or services in a specified place. And the franchisor is obligated to assist the franchisee through advertising, promotion, research and development, quality purchasing and as well as the training and education. These classified as a wasting asset due to the penile term of the license. In franchising, timing an important role since you must have to and examine the right brand value. And, you should also bonds to the wagon of what product is a very interesting and eye catcher to everybody that is and competing product in order to gain 90% more rate successful business operation. Because if you dont?, all your plans meaningless but a useless, and will lead you to a FAD FRANCHISE is which is commonly called as a short live fashion that will brought forth a wasteful franchise business.

Franchising

According to Bob Gappa, is one of three business strategies a company mat use in capturing market share. 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 companys products and services can help them and can satisfy their needs as well. A franchising is a network of interdependent business relationships that allows a number of people to share: A brand identification A successful method of doing business A proven marketing and distribution system Further to explain, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with s common goal to dominate markets. To get and keep customers than their competitors. There many misconceptions about franchising, but probably the most widely held is that as you as a franchisee are buying a franchise. In reality you are investing your assets in a system and ongoing support you and everyone in the system are licensed to use the brand you and operating system. To be successful in franchising, as a franchisee you must understand the business and its legal ramifications of your relationship with the franchisor. Your focus must be on working with other franchisees and company managers to market the brand, and fully used the operating system to get and keep customers. Many say that other franchisees and company operated units are not your competition. But the opposite is true. They and you shares the tasks of establishing the brand as the dominant. Brand in all markets entered and reinforcing the customer familiarity with and trust in the brand. In short, you are working as a team with others in the system with common goals and common objectives to achieve. It is increase the value of the brand name which is shared responsibility of the franchisor and of the franchisee. As you are a franchisee, your own the assets of your company which you have chosen to invest in someone else brand and operating system and ongoing support. But you are licensed and given authority to operate someone else business system. Concluded, if you desires to become a franchisee, you must be grounded in your belief that you can be more successful using someone else brand and operating according to their system and methods, than you could you opened up your own independent business and competed against them. And, you must have to look forward for best franchisor who are committed to getting and keeping customers, to growing faster than the market, to growing faster than the competitors, and to do all that with high margins. When you find a franchisor with all of this qualities, then you probably found the right and

perfect franchisor that worth your consideration. These franchise is being protected by the PATENT which a law that no one can carry or imitate their operation s, system, formulas, etc. money is the main pre requisite in engaging a franchise business, in which no money, then no franchise. Lotto is considered as the main example for the MASSES through which money businessman invest their money to these in the sense that LOTTO is widely known to customers to get their lucks and in return, franchisees earned more times income from their invested assets.

What can the franchisor do?

Essentially, and in terms of distribution, the franchisor is the supplier who allows an operator, or a franchisee, to use the suppliers trademark and distributed the suppliers good. In return, the operator pays the supplier fee. As a franchisor, you may find the nature of your relationship with your franchisees to be unique and even an occasion, daunting while you have the right and obligation to enforce system standards, your franchisees often view themselves as an independent business ( which they are) with the ability to call their own shots ( which they are not). And while the relationship is contractual in nature, if you are ever force d to bring out the contract, the relationship is already jeopardy. Thus, the franchisor must pay particular attention to the franchisor franchisee relationship from the very start if he or she is to create a long term and mutually prosperous undertaking. Time and time again, it is only the franchisor who has the authority and can directly contact to a franchisee from its lists if or she likes and negotiated dos and donts of the franchisor. The key to being a good franchisor starts with communication and that means more than the occasional newsletter and a visit from the field representative. Thus relationship is built with dialogue and the goods franchisors are careful to create multiple venues where constructive dialogue will occur. One of the most important tools at a franchisor is that he or she must create a good communication towards the franchisee and to build up a council not only allows you to control the agenda, but also assures you a voice on it. The last thing you want to do is find out your franchisees have formed an organization without you thats usually a sign something is wrong and they have excluded you from the process resolving the grievance.

To be effective, the communication needs to be more than frequent. It needs to be honest and to sustain long term relationship trust with each other is highly required. This trust starts with openness and honesty. Further to elaborate, a franchisor helps a franchisee manage the franchise, gives care on it and help them achieve their aiming success today, tomorrow and i8n the future togetherness.

History of franchising

Franchising developed over time as an efficient way to do business and there were versions of franchising employed in Europe countries ago. The origin of the word franchise goes back to Anglo French, meaning freedom or liberty, and from middle French, franchise, to free and earlier from old French franc, free. Earliest franchising Isaac M. Singer (1811 1875) gets credit for starting the modern used of franchising in the U.S. during the early 1850s, Singer, who had improved and existing sewing machine model, wanted to find a wider distribution for his product but lock the money to increase manufacturing. Another problem was that people wouldnt by him machine without training, a service retailers werent able to provide. Singers solution, to charge licensing fees to people who would own the rights to sell his machines n certain geographical areas, provided money for manufacturing. This license became responsible for teaching people how to use his machines, which created opportunities to bring the first commercially successful sewing machine to the public. As a founder of the singer sewing machine, he was known the initiator of franchising. He was actually the earliest person recognized by most as being associated with franchising. However, the concept of franchising really began long before. These terms franchising derived from ancient French which defined as holding a particular privilege or right. Franchising was employed on a limited basis after the success of Singers sewing machine distribution method. Business format franchising (the licensing of the brand name trademarks and of the entire business concept). This is the dominant mode of franchising today, come into the economic scene after World War II and the subsequent baby boom. There was overwhelming need after for all types of products and services, and franchising provided a way to quickly grow businesses. Throughout history, franchising has promoted economic liberation, synergy, and opportunity, and has been true to its etymological roots which means feeing commerce from many of the traditional chains that had bound it. franchising in the single most successful marketing concept ever . At the time, it was an accepted practice for local governments to offer important persons, even high church officials, a license granting them the right to maintain civics order and to make special tax assessment. Courts or lords could also grants right to other to operate ferries, hold markets, and perform the business activities today to carry out by professionals and craft guilds. The license paid o royalty to the powers that be in exchange for, among other things, protection. According to Kerry Pipes in the modern age, franchising is a proven business model that has stood the last of time. And it was really begun to blossom in the post post war 1950s and 1960s, which franchisors of convenience goods and services seemed to popping up on every corner. Like McDonalds,

Kentucky Fried chicken, laundry services, dry cleaners, hotels, and rental car franchises flooded the market place. Franchising model works because it provided a formula for operating a successful business by delivering a uniform product and services to customers. It provides franchisors with the capital they need, creates distributions channels, and gives consumers and recognized standard of what to expect and a higher perceived value. Done right, its a model that benefits business owners, operators, and customers like. Furthermore, given the franchising over the last century has been true to its roots in freeing commerce, the goal is to encourage then indomitable entrepreneurial spirits that has led to abuse in the past. It is the right balance of legislation, regulation, enforcement, oversight, self policing and education that will pare the way for franchising in this new millennium. It has powerfully transformed the entire perception of business culture and practice. Today, more than 950 franchisors, majority local operate in the country and the number keeps growing to the advantage for the consumers more competition, more choice, moir bargains. Almost all of them in the food business other some kind of value meal combinations. Some of them are exporting their franchise system to other countries. And lastly, on its current status from 1996 until present franchising still works all over the world. Advances in technology, orientation towards a service economy, a relative decrease in the importance of the product franchising, an expansive interstate road system, active baby retirees looking to be their own boss, and women in the work force, have all contributed to the burgeoning rise in business format franchising. Relative to the size of the statewide economy, franchising had the greatest impact on jobs and payrolls worldwide. Clearly, the federals trade commission in the year 1978 enacted a law requiring all franchisors to submit to all potential franchisees a document called the franchise disclosure document (FDD) prior to receiving money. The FDD provides detailed information on the franchise company, including its history, the officers, and any litigation history, estimated investments, an overview of the business concept, and a copy of franchise agreement a current list of franchise owners names and telephone numbers is a required components, allowing prospective franchisees the opportunity to research the franchisors claim. The purpose of FDD is to provide sufficient information on a company to help the prospective franchisee to make a more informed decision. It is also to be presented in a manner that is consistent, straight forward and relatively easy to understand.

What is franchisee? Franchisee is a person or entity to whom the right to conduct a business is granted by the franchisor or licensor. One who purchases a franchisees who runs that location of the purchased business in which he or she responsible for certain decisions but other decisions (such us the look, name, and products) are already determined by the franchisor and must be kept the same by the franchisee. The franchisee will pay the franchisor under terms of the agreement, usually either a flat fee or a percentage of the revenues or profits, from the sales transacted at the location. A franchisee is an individual who purchase the rights to use a business trademarked name and business model to do business. The franchises purchase a franchise from the franchisor. As franchisee he or she is oblige to follow certain rules and guidelines already established by the franchisor, and in most cases the franchise must pay an ongoing franchise royalty fee to the franchisor. Franchisee in the other words is the operator of the franchisor business who has given authority and license to manage the franchise by the franchisor. He has a person authorized in running a business which he purchased from a business owner. He will find that the franchised agreement places restrictions on them in this regards. To flip side in that a branded business may be easier to sell and may even command a higher price. What are the disadvantages of franchisee?

There are facts that as a franchise they also have disadvantages to be encountered. And here are the following: 1. Cost as franchise they are expected to pay an upfront fee as well as going fees. Set up costs, to may be above average, as the franchisor having invested a great deal of money into the development of the corporate image, will not permit shortcuts on the other hand, discerning consumers may will be attracted by an image exuding professionalism all around, and break even may be reached sooner. In a similar vein, the cost of ongoing fees will be offset by bulk purchase advantages and benefits flowing from the franchisors support mechanism. 2. Controls although franchisees own the infrastructure of their business, they are contractually bound to adhere to the franchisor operational guidelines. For an individual determined to do it his way this can be a source of constant irritation. 3. Restriction on the sale of the business An independent operator is free to sell his business whenever he wants to and to whomever he chooses. He does not need to concern himself with the suitability of the purchaser to operate the business according to the franchisors guidelines; it is simply a matter of willing seller? Willing buyer. 4. Franchisor failure franchising is often licensed to a marriage, and there is some justifications in this statement, generally speaking, franchisees are bound to the franchisor

for better or worse . Should the franchisor make a bad business decisions, franchisees success chances could be severely hampered.

Advantages of a franchisee Despite of all the disadvantages the franchisee had encountered, there are also advantages that would help the franchisee to recover from its negative side. The following are its advantages: 1) The franchiser does all of the advertising nationally, which will save the franchisee money and time. 2) The franchiser does all the training and administration, which also saves the franchisee money and time. 3) And the chance of the business failing is reduced as the business will already have a trade record set up.

What is a franchisor? A franchisor is typically, a successful entrepreneur who has established successful business with developed business system, trademarks, product and services. The asset and value that a franchisor bring to the franchising table, includes or at least should include. Proven business mode the primary value of a franchise system and the distributions of the franchisor must relate to a well established business that has been tested, is recognized by the business and delivers a sought after product or service. Franchisor contributed a proven business model that has worked for the franchisor. Recognized Trademark and Brand A core component to franchising relates to standardized trademarks, trade dress and brands that associated with the franchised business a primary contribution by franchisors relates to the licensing of the franchisors trademarks ; e. Franchisees are granted a license to utilize the franchisors recognized trademark. Established business system business system is critically important and relate to successful and efficient method developed or refined by the franchisor for the operation of the franchise business. Training and support a key feature and benefit of a franchise system must include and relate to extensive training and support A franchisor is the company owning and controlling the rights to grants franchise to potential franchisees. He is the originator of the business that the franchisee purchase and operate his business.

Franchise operations The driving force of Starwood franchisee franchise operation is to make available to each franchisee the tools necessary for implementing our industry leading programs at each model. Our expertise in working with best in class management companies and owners throughout the world results in the following benchmarks of excellence: Strong brands through proven system to construct or convert your hotel Cost effective and comprehensive training for your manager and staff in brand standards and guest satisfaction. Sales, marketing and a global reservations system to bring guest to your hotel, including our SPG guest who spend more than other guest and drive repeat business. Voluntary purchasing program to lower your cost Strong communications platform to share ideas and answer your questions

How to Transfer a Franchise.

Transferring or assigning a franchise involves passing your rights and responsibilities under the franchise agreement to someone else when you purchase a franchise from the other of a product or service you get the right to success the product or services and to use the franchisors name. The franchisor may even offer some knowledge transfer in the form of training and information products. The franchise is governed by the franchise agreement, with you sign along with the franchisor. Franchisor transfers are also bound by franchise agreement terms.

Here are instructions that are useable in transforming a franchisee 1) Read your franchise agreement for any clause that restricts franchise transfer. Such cause are rare, because a franchise is considered a property under several state laws, which give you the right to dispose of the property. Verify the requirements in local laws for when and how you can transfer a franchise. Employ a competent business lawyer to insure that youre eligible to execute a franchise transfer. 2) Prepare a franchise assignment or transfer in writing, once youre sure you can transfer the franchise. Make sure the transfer document includes a clause that the transfers agrees to own your responsibilities to the franchisor, as stipulated in the franchise agreement. This includes matters such as royalty payments to the franchisor and maintenance confidentiality of the franchisors trade informations 3) Includes a clause that indicates your agreement to remain responsible to the franchise agreement. If the transferees default on a royalty payment, for example, you can be held liable for the breach of agreement. 4) Inform the franchisor of the propose transfer through a written notice, before making the transfer. The notice should include the details of the transfer, transferees and any payment you will receive for the transfer. 5) Execute the transfer, but only if the franchisor contents to the transfer.

10 common mistake of prospective franchisees 1) Not reading, understanding or asking questions about the disclosure document. If you need read the document (UFOC), keep notes on that areas that are confusing and unclear. While you may want your attorneys opinion, give the franchisor the benefit of the doubt and first ask its representatives to explain their understanding. Then check the remainder of your concerns with your attorney.one of the most common problem between new franchisees and the franchisor is the misunderstanding as to responsibilities. Among other things, this can cause problems in meeting the schedules for grand opening dates. 2) Not understanding or having an inaccurate or incomplete interpretation of the franchise agreement and other legal documents to be signed. You and your attorney should carefully review the franchise agreement, the lease or real agreements and any other contracts. 3) Not seeking sound legal advice. Locate and retain an attorney preferably one experience in franchising. 4) Not verifying and representations of the franchisors. 5) Not contacting enough current franchisor. 6) Not confirming the reasons for failed franchises. 7) Not having enough working capital. 8) N0t recognizing the need for financing how to make a proper loan request and not developing a true and accurate financial statement.

9) Not meeting the franchisors key management at their headquarters and the field representative assigned to your territory. 10) Not analyzing your market in advance.

Should I buy a franchise? Franchise can be a shortcut to success

When it comes to starting a business many people think of buying a franchise as a shortcut to success. While there is some truth to this, not all franchisees are created equal, and not everyone cot out to be a franchisee. But, if you are a person which is very entrepreneurial and is very business mended, innovative, creative, then do not engage franchising, but stand with you8r own feet and establish your own brand to become a franchise.

If there are franchise in your future? Here are advantages and disadvantages of buying a franchise and what to expect when buying a franchise to help you decide.

1) 2) 3) 4) 5)

Lower failure rate Help with start Up and beyond Buying power Start power Profits Disadvantages of buying a franchise

1) 2) 3) 4) 5)

Their way or high way Ongoing cost Ongoing support Cost Shark infested waters

How to buy a franchise

Investing in your own business can be one of the most critical decisions one will ever make. The challenges are enormous physically and emotionally, even finalizing a decisions to own ones own business is daunting in itself. Many budding entrepreneurs cop out early into the decision making process. Usually individuals wanting strike out on their own were never responsible over all for sales, marketing human resources, customer service, quality assurance, operations, legal compliance, accounting and much more. When owning a business, including a franchise all of those roles will often be carried out on a daily basis. In principle owning a franchise will reduce the risk of not having conducted many of those roles for those brave individuals who ultimately decide to become a franchise. The foundation of a business format franchising is that the franchisor has developed a system, which was been proven successful, which can be duplicated by others being franchisee. When a business, whether it be associated with food automobiles, building, or consisting (there are 75 franchise industries) decides to grow by franchising US a product or service distribution scheme, that business must develop documented system which have contributed to that business prior success, and which can be replicated by its future franchisees. The new franchisee be trained and provided with or success, to manuals covering the mission critical functions referred to earlier. Selecting the franchise in itself is a serious and time consuming process while many new franchisee select a franchise after having a personal experience at a franchise outlet, most use the internet to search for a franchise to buy. When interested one or more franchisees of interest, one simply completes a request for further information form with their personal information on how to be contacted by the franchisor. While some companies want only basic information others while want the candidate to provide much more since they do not want to waste their time. Some companies receive literally hundreds of leads daily for seemingly interested prospect, many of which are not qualified to own their franchise. Expect to receive a phone from the franchisor, and if you are genuinely interested in becoming a serious candidates, then it is imperative that you respond, in order to consider a genuine contact. There so many franchises to consider how can you choose which one may be best for you? First have some knowledge of you financial capability. Do you have capital available to invest? Dont forget the possibility of obtaining additional capital for the investments from a love one or a friendly investor. Next, think about what you like to do, and what you do not like to do, and choose accordingly. If you dont like working with the public, then a retail business should not be considered. If you like working with the children, animals, craft, or involvement in sports, then target a franchise in that matching category.

After you speak with the franchise representative, if you are still interested, and if the franchise is interested in you, then you will requested to complete a formal franchise application which will involve typically a credit check and sometimes a background check. If you meet the franchisors guidelines, then to move forward by law the franchisor is required to send or provide to you a disclosure document, known as a franchise disclosure document, (FDD) Read the FDD, carefully since it will include a vast amount of information on the franchise such as; history a franchise and its key principals, financial statement, litigation, franchise openings, closing terminations, franchise contact, franchise agreement, requirements and more. One of your key questions to the franchise representative early on may be how much can I make. By law a franchise sales person cannot provide you with an earnings claim, unless it is included in the disclosure document. There is no legal requirements that the franchisor must provide with you an earnings claim, however some franchisors do provide it. if the franchisor has chosen not to provide it, then it remains important to contact others franchisees listed in the disclosure document. Other franchisees can answer many of your questions. Many franchisors will also require you to visit there headquarters before signing the agreement, so that you can both get to know each other better. This is known as discovery day.