FRANCHISING: AN EMERGING GLOBAL TRENDSTeacher – Shahed Rahman

FRANCHISING SYSTEM Franchising is a vertical

marketing system in which one firm ( The franchisor) provide another individual or firm ( the franchisee), for consideration, a license privilege to do business in a specified geographic area, along with assistance in organizing training, merchandising, and managment

CONSIST OF THREE RELATIONSHIPS Legal Relationship

The contract between the franchisor or franchisee The responsibilities and obligation

Business Relationship Day to day activities necessary to provide

acceptable products and service to customers Franchisee operates the business under the

franchisor’s trade name or marketing plan Nonbusiness Relationship

Forward looking, cooperative association that exist between two independent channel members

Success is tied directly to the success of other Interrelated intrinsically to one another

FRANCHISING SYSTEM Franchising Systems consist of network of

franchisors and franchisees With in this system franchisees receives the

training, guidance, preparations necessary to use trade secrets, operational procedures.

BENEFITS OF FRANCHISING Developing the business with less cost Independent owner Rapid market penetration Franchisors do not need to motivate

franchisee – as they are the owner of the company

Franchisees get an extensive support from franchisors.

Proven product o service concept Recognizable brands Standardized methods for operations

TYPES OF FRANCHISING Tied-house Franchising Systems

First generation franchising German brewers in the 18th century contracted with

tavern to sell their brand of beer exclusively Product/Trade name Franchising

Second generation appeared during the 19th century Singer sewing machine company elected the sales

people to sales its product Distribute a product under franchisor’s trademark

Business Format Franchising 20 th Century by A&W Replicate a complete business concept including

product or service.

CONCERN OF FRANCHISEES Franchising not always confirm profit When contract is over the franchisor can

pass to another entrepreneur. Open another store or franchise near your

store Independence level Some franchisor just do it for market entry Franchisor collect promotional money from

franchisees

CONCERNS OF FRANCHISORS Franchisees who decides to buy supplies or

equipments from independent sources. Effect franchisors profitability Royalty fees to franchisors Reporting their gross sales honestly Franchisees can hide some of the incident

what is bad for the company. Not following the marketing strategies.

RELEVANT TRENDS IN FRANCHISING ENVIRONMENT Social, Cultural and Demographic Trends Economic Trends International Trends Industry Trends

INTERNAL ENVIRONMENTAL FACTORS Conflicts in Franchising

Upfront Fees Tying agreements Capricious Termination

Lack of security since franchisors can terminate agreements or fail to renew them at the end of pre specified period Expiration of the term of the contract Franchisee bankruptcy Some default in franchisee’s performance

Encroachment Lack of Cooperation

PROTECT YOURSELF BY …. Self Evaluation Investing the franchise Studying the disclosure document Checking out the disclosure Questioning earning claims Obtaining professional advice Knowing your legal rights

CURRENT LEGAL STANDARDS IN FRANCHISING Disclosure

FTC Rule 436 Mandatory Purchases from the

Franchisor Termination and Renewal Advertising and Promotions Percentage you have to pay for

promotion Expansion

Franchisor constantly think of expanding into the market that is already being served

MAKING FRANCHISE RELATIONSHIP WORK

Strategic Franchise Partnerships Mutual responsibility Communicating up and

down Franchisees as customers Leadership and attitude

Creating a climate for open communication

Commitment to mutual goals Achieve those goals require

leadership