Beruflich Dokumente
Kultur Dokumente
Entrepreneur
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-1
The Franchising
Boom!!!
Shoppers can now buy virtually
every product or service
imaginable through franchises
More than 854,000 franchise
outlets in the United States
employ almost 9.6 million people
generate $835 billion in annual
output – an amount that is 5.8% of
the country’s GDP
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-2
Global Franchising
52% of U.S. franchisers have
international outlets
Of the U.S. franchisers who operate
globally, 30% of their total outlets are
located in other countries
Hot markets: Europe and Pacific Rim
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-3
Franchising
Franchising – semi-independent business
owners pay fees and royalties to a parent
company in exchange for the right to sell its
products and services under the franchiser’s
trade name and often to use its business
format and system
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-4
Figure 4.1 The Franchising Relationship
Site selection Oversees and approves; may choose site Chooses site with franchiser’s approval
Products and services Determines product or service line Modifies only with franchiser’s approval
Purchasing Establishes quality standards; provides Must meet quality standards; must purchase
list of approved suppliers; may require only from approved suppliers; must purchase
franchisees to purchase from the franchisor from supplier if required
Advertising Develops and coordinates national ad Pays for national ad campaign; complies with
campaign; may require minimum level of local advertising requirements; gets franchisor
spending on local advertising approval on local ads
Quality control Sets quality standards and enforces them Maintains quality standards; trains employees
with inspections; trains franchisees to implement quality systems
Support Provides support through an established Operates business on a day-to-day basis with
business system franchiser’s support
Source: Adapted from Economic Impact of Franchised Businesses: A Study for the International Franchise Association, National Economic Consulting Practice of
PriceWaterhouseCoopers, (IFA Educational Foundation, New York: 2004), pp. 3,5.
Types of
Franchising
Tradename
Product distribution
Pure (Business format)
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-6
Why Buy a Franchise?
Franchisees are buying the franchiser’s
experience
“Going into business for yourself but not by
yourself”
Franchisees get a proven business system and
avoid having to learn by trial-and-error
Before buying, ask: “What can a franchise do
for me that I cannot do for myself?”
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-7
Benefits of Franchising
Business system
Management training and support
Brand name appeal
“Cloning”
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-8
Benefits of Franchising
Financial assistance
Franchise Registry
Proven products and business
formats
Centralized buying power
Site selection and territorial
protection
Greater chance for success
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-9
Greater Chance for Success
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-10
Source: National Federation of Independent Businesses and U.S. Department of Commerce.
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 4-11
What Franchisers Want in
Franchisees
1. People skills 94%
2. Ability to be coached 87%
3. General business skills 86%
4. Access to capital 84%
5. Entrepreneurial mindset 76%
6. Specific industry skills 29%
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-12
Drawbacks of Franchising
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-13
Drawbacks of Franchising
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-14
Ten Myths of Franchising
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-16
Ten Myths of Franchising
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-18
Franchising and the Law
The UFDD contains information on 23
topics, including:
Franchiser’s business experience
Franchise fees and costs
Lawsuits involving the franchiser
Financial assistance available
Territorial protection granted
Restrictions on purchasing
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-19
Detecting Dishonest
Franchisers
Claims that the contract is “standard;
no need to read it”
Failure to provide a copy of the
required disclosure documents
Marginally successful prototype or no
prototype
Poorly prepared operations manual
Unsolicited testimonial from “a highly
successful franchisee”
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-20
Detecting Dishonest
Franchisers (Continued)
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-21
Detecting Dishonest
Franchisers (Continued)
No written documentation
High pressure sale
Claims to be exempt from federal
disclosure laws
"Get rich quick" schemes, promising
huge profits with minimal effort
Reluctance to provide a list of existing
franchisees
Evasive, vague answers to your
questions
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-22
How to Buy a Franchise
Preparation, common sense, and patience
are vital ingredients in choosing the right
franchise
Evaluate yourself – What do you like and
dislike?
Research the market
Consider your franchise options
Get a copy of the franchiser’s Uniform
Franchise Disclosure Document (UFDD) and
study it
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-23
What Should You Look
For?
A unique concept or marketing
approach
Profitability
A registered trademark
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-24
What Should You Look
For? (Continued)
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-25
How to Buy a Franchise
(Continued)
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-26
Table 4.4 Advantages and Disadvantages of Buying a New vs.
an Established Franchise
Pros Cons
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-28
Trends Shaping
Franchising
International opportunities
Global markets offer fast-growth
opportunities especially China and India
Other major markets: Canada, Europe,
Pacific Rim countries, South America
Key to success: Adaptation
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-29
Trends Shaping
Franchising
Changing face of franchisees
Minorities
own 19.3% of all franchises
and women own 25% of them
Conversion franchising
72% of North American franchisers use
as a growth strategy
Multiple-unit franchising
19.8% of franchisees operate
multiple outlets (and growing)
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-30
Trends Shaping
Franchising
Master franchising
Piggybacking (or combination or multi-
branded franchising)
“Buddy system”
Serving aging baby boomers
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-31
Franchising as a Growth
Strategy
Issues to consider:
Do you have a unique concept?
Is your business model replicable?
Have you developed an expansion plan?
Have you performed due diligence?
Do you have proper legal guidance?
Initial cost to launch a franchise
business is $100,000 to $750,000
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
4-32
Franchising Web Sites
Chapter 4 Franchising Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall
4-34