FRANCHISING

freedom from servitude . . .

WHY IS FRANCHISING SUCCESSFUL?

WHY IS FRANCHISING SUCCESSFUL?

We are BRAND DRIVEN

and PEOPLE OF

HABIT!

FRANCHISINGA network of interdependent business relationships that allows a number of people to share:

1. A brand identification

2. A successful method of doing business

3. A proven marketing and distribution system

DEFINITION OF TERMS

Franchisor / Franchiserthe person or company that grants the franchisee the right to do business under their trademark or tradename

Franchiseethe person or company that gets the right from the franchisor to do business under the franchisor’s trademark or tradename and benefits from it.

Franchise Agreementthe legal, written contract between the franchisor and franchisee which tells each party what each is supposed to do

Single-Unit Franchise Agreementan agreement where the franchisor grants the franchisee the rights to open and operate ONE franchise unit

DEFINITION OF TERMS

Multi-Unit Franchise Agreementan agreement where the franchisor grants a franchisee the rights to operate MORE THAN ONE unit

Area Development Franchise Agreementan agreement where the franchisee has the right to open more than one unit during a specific time, within a specific area

DEFINITION OF TERMS

Master Franchise Agreementan agreement where the franchisee is given more rights than an area development agreement; such as sub-franchising or the right to sell franchises to other people within a territory

UFOC / Disclosure Statementthe Uniform Franchise Offering Circular is the disclosure document that provides the information about the franchisor and franchise system to a prospective franchisee.

DEFINITION OF TERMS

Franchise Feethe payment given to the franchiser for joining the network. It can be seen as an entry fee paid for the “secrets of the business”.

Royalty Feerepresents the amount the franchisee pays the franchiser every month (or whenever agreed) for commission of its sales. In return, the franchiser provides continuous training, market studies and release of new products.

DEFINITION OF TERMS

Advertising / Marketing Fundthe monthly fee paid by the franchisee for a common fund, managed by the franchiser for promoting the brand

Copyright & Registered Trademarkthe usage of the brands & products / special services / methods of production, etc. patented by the franchiser are authorized to the franchisees and will be protected from abusive usage by potential customers.

DEFINITION OF TERMS

TWO MAIN TYPES OF FRANCHISING

PRODUCT DISTRIBUTION FRANCHISE

BUSINESS FORMAT FRANCHISE

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PRODUCT DISTRIBUTION FRANCHISE

Franchise that simply sells the products of the franchisor and have supplier-dealer relationships

The franchisor licenses its trademarks and logo to the franchisee but does not necessarily provide them with an ENTIRE system for running their business

Usual examples: soft drink distributors, automobile dealers and gas stations

BACK

BUSINESS FORMAT FRANCHISEType of franchise includes not only the a product, service and trademark but also the complete method to conduct the business itself, such as the marketing plan and operations manual

Usual examples: fast food, service, restaurants, retail, lodging, automotive, building & construction

BACK

ADVANTAGES & DISADVANTAGES OF FRANCHISING

ADVANTAGES DISADVANTAGES

To the FranchiseeEstablished Concept

Tools for SuccessTechnical & Managerial HelpStandards & Quality Control

Minimum RiskLess Operating Capital

Access to CreditComparative AssessmentResearch & Development

Advertisement & Promotion

Other Opportunities

Unfulfilled ExpectationsLack of Freedom

Advertisement & Promotion Practices

Cost of ServicesOver Dependence

Monotony & Lack of ChallengeTermination and Renewal

Other problems

ADVANTAGES DISADVANTAGES

To the Franchiser

Business ExpansionBuying PowerOperational ConvenienceFranchisee’s ContributionMotivation & Cooperation

Lack of FreedomFranchisee’s Financial

SituationFranchisee

Recruitment, Selection and Retention

Communication

ADVANTAGES & DISADVANTAGES OF FRANCHISING