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SMALL BUSINESS MANAGEMENT

SMALL BUSINESS MANAGEMENT. Chapter 6 Franchising. History and Background of Franchising. Most rapid growth in North America since the 1950s. 1960s: Franchisee associations formed and legislation to protect rights of franchisees and franchisors.

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SMALL BUSINESS MANAGEMENT

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  1. SMALL BUSINESS MANAGEMENT Chapter 6 Franchising

  2. History and Background of Franchising • Most rapid growth in North America since the 1950s. • 1960s: Franchisee associations formed and legislation to protect rights of franchisees and franchisors. • More than 40% of all retail sales resulted from franchising in North America in the last decade.

  3. What Is Franchising? • Manufacturer-Directed Franchise • ____________ • Wholesaler-Retailer-Directed Franchise • ____________ • Franchising Company • ____________

  4. Franchising Terms • ____________ • An entrepreneur whose power is limited by a contractual agreement with a franchisor • Franchisor • The party in the ____________ contract that specifies the methods to be followed and the terms to be met by the other party

  5. Franchising Terms • Product and Trade Name Franchise • Grants the right to use a widely recognized product or name • Business _______ Franchise • Provides an entire marketing system and ongoing guidance from the _______ • Piggyback Franchising • The operation of a retail franchise within the physical facilities of a host store

  6. Reading the Fine print • Briefly discuss the advantages and disadvantages of franchising that are identified in this example. • What could prospective franchisees do to reduce the risks of the problem identified in this example?

  7. Advantages of Franchising • Proven _______ for the product or service. • Services the Franchisor May Provide 1. Selection of _______ 2. Purchase or Construction of Site, Buildings, and Equipment 3. Provision of _______

  8. Advantages of Franchising • Services the Franchisor May Provide (cont.) 4. Standardized _______ of Operating 5. Advertising 6. Purchasing _______ 7. Training

  9. Potential Disadvantages of Franchising • Lack of _______ • Cost of the Franchise • Unfulfilled _______ • Restrictions of the Contract • Product or Service Offered • Line Forcing • Termination

  10. Potential Disadvantages of Franchising (cont) • Saturation of the _______ • Lack of Security • Cost of _______ • Effectiveness of Promotion • Exaggeration of _______ Success

  11. Evaluation of a Franchise Opportunity • Franchisor • Industry _______ • Professionals • Other Franchisees • Government Agencies • Additional _______ to Investigate

  12. The Entrepreneur as Franchisor • What businesses can be franchised?

  13. The Entrepreneur as Franchisor • How does one become a franchisor? 1. Establish a prototype. 2. Prepare the necessary information. 3. Investigate the legal requirements. 4. Develop a planned and standardized program of operations. 5. Obtain adequate financing.

  14. Franchising in the Future • “Piggybacking”: Two or more franchise operating in one outlet. • “Branchising”: Converting existing chain outlets to franchises. • “Mini-franchises”: Small satellite versions of larger franchises. • Growth of service-based and home-based franchises

  15. Franchising Frauds • The Rented Rolls Royce Syndrome • The Hustle • The Cash-Only Transaction • The Boast • The Big-Money Claim • The Couch Potato’s Dream • Location, Location, Location • The Disclosure Dance

  16. Appendices • A. A Sampling of Franchises Operating in Canada • B. Trade Associations and Government Departments that Assist Franchisors and Franchisees • C. A Checklist for the Potential Franchisee; Questions to Answer Affirmatively before Going into Franchising • D. Franchise Contract Clauses

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