Franchising in retailing
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Franchising is a successful method for national and international retail expansion where a franchisor provides a licensed privilege to do business and assistance to franchisees in exchange for fees. The franchisor oversees site selection and product decisions while providing design support and training, and the franchisee operates the business by choosing locations, hiring employees, and following brand standards. Franchising has evolved from powers to peasants and now provides a complete business package through brands like McDonald's. While it allows for growth and financial support, franchising also comes with royalty fees and less business control for franchisees.
Franchising in retailing
- 1. Franchising in retailing • successful method of national / international retail expansion. • Def- continuing relationship in which franchisor provides licensed privilege to do the business + assistance in organizing, training, merchandising, and management in return for a consideration from the franchisee. • Roles of franchisor and franchisee. Function Franchisor franchisee Site selection Oversees Chooses with approval Design Provides design Incurs cost Employees Training Hires, supervises, pays Products to b Decides Can change if prior sold approval Prices Sets/recommends Follows Ad /promotion Decides nationally May suggest local needs
- 2. • Evolution- powers to peasant. singer machines and now in 1950 by Raycrok -MacDonald. • Types- 1-product/trade-name to acquire mfr’s identity to some extent, 2-busines format franchising. License for predetermined financial returns thru complete business package including training ,support of corporate name e.g. restaurants • May b single unit, or master franchise-for region/country who then sets up unit franchise, • Advantages- 1-low risk, 2-growth,3-ease of financing and operational supports, 4- reduced ad costs, Disadvantages-1- royalty fees,2- lack of control • Issues- being a contractual relationship so legal matters. Intellectual property rights on patented products, trade mark or trade names copyrights, consumer conflicts as consumer protection acts, weights and measure acts for packaged commodities, laws related to real estate investments • Changing consumer lifestyles demands and people can achieve their entrepreneurial dreams. Great way to make it expand even as a national brands. • Critical success factors like franchisee economics, aggressive unit growth