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Definition of a Franchise

Definition of a Franchise. An arrangement whereby someone with a good idea for a business (the franchisor) sells the rights to use the business name and format to another party (the franchisee), who then sells the product or service in a designated territory. Franchise Contract.

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Definition of a Franchise

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  1. Definition of a Franchise An arrangement whereby someone with a good idea for a business (the franchisor) sells the rights to use the business name and format to another party (the franchisee), who then sells the product or service in a designated territory.

  2. Franchise Contract Franchisor, Inc. Branded Product/Service Royalties $$$$$$ Franchisee

  3. Assigns Territory Provides Financial Aid/Advice Offers Merchandise/ Supplies at Competitive Price Provides Training/Support Business Expansion Using O.P.M. Franchisor

  4. Franchisee • Pays Up-Front Costs • Makes Monthly Payment to Franchisor • Runs Business by Franchisor’s Rules/Procedures • Buys Materials from Franchisor/ Approved Supplier

  5. Top 10 Franchises for 2003 • 10. Sonic Drive-In Restaurants • 9. Jackson-Hewitt Tax Services • 8. Super 8 Motels, Inc. • 7. Quizno’s Franchise Company • 6. Taco Bell Corporation • 5. Jani-King • 4. McDonalds Corporation • 3. 7-Eleven, Inc • 2. Curves • 1. Subway Source: www.entrepreneur.com

  6. Management & marketing assistance Personal ownership Recognized name Financial advice & assistance Lower failure rate High start-up costs Shared Profit Management regulation Coattail effects Restrictions on selling Oversaturation of a territory by the franchisor Franchises Disadvantages Advantages

  7. Top Growth Franchises • Curves • Subway • 7-Eleven • Taco-Bell • Jani-King • McDonald’s • Jan-Pro Franchising Int’l • Baskin Robbins USA Co. • Quizno’s Franchising Company • KFC Corp. Source: Entrepreneur, September 2003

  8. Survival After Startup Franchise vs. Independent

  9. Mergers and Acquisitions • Merger the combination of 2 or more firms to form a new company, which often takes a new corporate identity • Acquisition The purchase of a corporation by another corporation or investment group

  10. Most Expensive Mergers/Acquisitions

  11. Types of Mergers/Acquisitions A B = AB Horizontal Conglomerate Vertical

  12. Vertical Mergers & The Supply Chain Raw Materials Component Manufacturer Assembly Distribution End User

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