Name: Rosemarie P.

Subalisid Franchising
Section: SBENT-3W Class Schedule: Thursday 10:30-1:30

Case Study 1

Thought it was Safer than Starting His Own Business

After nearly thirty years of employment which ended as a senior executive in the automotive parts
industry, Fred wanted to make a change in his life pattern. To quote: “I was tired of moving at such a fast
pace and sick of traveling ten to twelve days a month.” He wanted to go back to his hometown of
Indianapolis to pursue semi-retirement and stay the rest of his years there running a business. When his
former employer, a midsize firm in the automotive supply industry, was acquired three years ago, Fred
took the buyout funds and bought a car repair franchise in a close-in suburb to Indianapolis. He expanded
over the next seven years and now has five franchised locations in the greater Indianapolis market. The
last two businesses he financed primarily by revenues generated from his first two car repair locations.
The transition from being a senior executive to a jack-of-all-trades franchised business owner has been
bumpy. Even with twenty-seven full-time employees (not counting himself and his wife), Fred is putting
in long hours and feels stressed on a daily basis.

Though his businesses are making money, Fred frequently works ten-hour days and spends evenings
submerged in paperwork. Fred sighs, “I’m supposed to be semi-retired, but am working as hard if not
harder than ever before. & quotes plight is not uncommon in the franchise world. Buying a franchise can
would-be entrepreneurs that have a dream of independence and self-fulfillment by creating financial
exposure, headaches, and the stresses of business ownership—while someone else collects royalties on
every dime that comes through the door, not to mention advertising and other fees; and all the while the
franchisor dictates most every detail of what Fred can (and cannot) do, including the types of signage to
put up, how to price services and parts, how much overtime to pay employees, and who will be his
suppliers. As Fred states, “Violate the agreement, even in some small way, and the franchisor can take the
franchise back. Then, where would I be? I’m stuck. I feel captured. I’m unhappy. Quote; Fred believed
that running a franchise business would mean being his own boss and running his own company, which
he now believes is a misconception. Fred believes that, in reality, his business venture of five service
centers is more like leasing a trademark and the real boss is the franchise system that sold him the
privilege.
Questions:

1. Is Fred ill-suited to be a franchisee, or, perhaps, did he just not understand what he was getting into at
the contract signing?
-It can be inferred, on the basis of this scenario, that Fred does not understand the franchise concept in
which franchisor and franchisee would have to work together to achieve market success. Both are owners
in their own companies, but franchisees would have to follow the franchise schemes and embrace the help
of the franchisor.
2. Could Fred's misconceptions be common among franchised business owners?
-Yes, it is because become a franchisee is difference with manage own business specially from
management part. As a franchisee, Fred have to follow every instruction from franchisor. But if as own
business, Fred can do any decision as his want. It is because when comparing franchise and independent
business in ownership which is in buying a franchise you may be disadvantages by difficulty in
terminating or renewing, selling or transferring the business; the franchiser can even terminate the
agreement. But when start an independent business, as long as you are solvent. You have total freedom to
sell or dispose of the business; no one else has any right to terminate the business.

3. What could Fred have done prior to signing the contractual agreement to better inform himself about
the business relationship?
-Fred should search more information about what is franchise business and all the relate document or
franchise agreement. In considering to buying a franchise or possible franchising your business, we’ve
identified that there are two key facets to examine carefully before making your decision. Franchising is
about compliance to a concept that works, and the franchise package goes a long way to ensuring this
compliance. The franchisee should have knowledge in franchise agreement as well as operation manual,
legal agreements, disclosure document, recruitment and selection programmers and training programmers
4. What should Fred do now, if anything?
-Fred should consider whether his want continue the franchise business or close it and go for other
business venture. It is because his aim is to be semi-retirement. But seem he can handled the franchise
business as well. If his want to continue the business, Fred can find the business consultant to get the
advice and make the correct decision.