FRANCHISING

Buying an existing franchise disadvantages

'tangible limitations: design, location, merchandise intangible limitations: customer or employee ill will, pricing problems, lease problems, inadequate procedures potentially higher costs to buy legal liability in inheriting lawsuits

Target Marketing

An explosion of customer segments, media choices, products and services, and distribution channels has made franchise system marketing more complex, more costly, and harder to be effective. Rethinking brands, and target markets are just two of the challenges facing franchisors to successfully grow their franchise organization.

New Business

Freedom with location and procedures

Formal training program:

Good franchisors provide good training to franchisees. This usually includes class room style training at corporate headquarters. Franchisees are taught things like pre-opening procedures, daily operations, marketing techniques, hiring practices, software use, and more. There's usually on-site training also, right at the new franchisee's location.

Limitations on product/service offerings:

If a franchisee owns a franchise like Signs Now, he or she is only allowed to sell signs, banners, and related sign materials. If the franchisee wants to add window cleaning services to the business, if it's not in the franchise agreement, then it's not going to be permitted.

Business opportunity

It refers an owner (producer or distributor) of a service or trademarked product grants rights to an individual for local distribution and or sale of goods or services, and in return receives a payment or royalty and conformance to quality standards

A franchise

It refers the right to carry on a particular name or trade mark, according to an identified system, usually within a territory or at a location, for an agreed upon term.

Operating system

It refers to the system developed by the franchisor that enables the business to be easily replicated by franchisees. This includes standard operating procedures and methods

Franchise opportunity

It refers to three components - a trademark, logo, use of a product or services, following a Marketing Plan, and payment of a royalty fee

Premium Pricing

Premium price to raise perceived value

New Business

No inherited problems from an existing business

Area Developer

One of the most popular ways to create multiunit franchises is to simply draw up an area development agreement. With this development agreement, the franchisee is given the right to develop and operate multiple units in a given area. This right generally is accompanied by obligations to establish a specific number of franchises in the designated territory over a given amount of time.

Rules:

Part of the attraction of the franchise business model is of course, the system. For a system to work properly and effectively, the users of the system must follow it closely. The franchise operations manual contains pages and pages of rules that franchisees must follow.

Specific marketing and advertising plan:

Part of the general business plan, the franchisor will have a proven, detailed plan that allows its franchisees to rapidly get to market with their products or services.

New Franchise

Reduced risk of failure

Line Extension

Slight "tweaks" to existing products that provide no true incremental consumer benefit

DMA

is a television market coverage area rating system, and is a common method of allocating geographical territories based on a market's media for advertising and promotion. is simply a map that outlines television viewing markets exclusive of one another based on measurable viewing patterns.

Starting A New Business Disadvantages

requires more time and energy high risk of failure takes longer to become profitable financing may be more difficult to obtain

Starting A New Business Advantages

usually lower start-up cost independence and creative freedom freedom with location and procedures no inherited problems from an existing business

CRITERIA FOR SELECTING A FRANCHISE

· Costs · Training and support · Your abilities · Franchisor's experience · Demand and · Competition · Expansion plans · Brand name

All successful businesses must:

· satisfy a need · solve a problem · respond to a trend

What are your options when you begin your business?

· start a new business · buy a new franchise · buy an existing franchise

Supervising

ØIt is about the training and disciplining required of personnel employed in the franchise organization.

Leading

ØLeadership behaviour is meant to influence others to willingly provide effort and cooperation in order to achieve the objectives of the organization.

Support staff:

Usually based at the franchisor's corporate headquarters, the support staff can help franchisees with whatever problems they are experiencing. These support areas include, marketing, technology, sales, real estate, and operations. Some franchisors have field reps that go out to visit and assist franchisees at their locations.

Value-based Pricing

Value pricing to increase demand

Product supply line / purchasing power:

When the franchisor buys products that the franchisees will use or sell, there's a discount involved, because the franchisor is really purchasing these goods on behalf ofa large number of franchisees.

Reputation management:

Your local reputation is only as good as your franchisor's. If the franchise brand runs into trouble, you will probably suffer at the local level.

Licensing Relationship

- A franchisor of a product, services or business method grants distribution rights to affiliated dealers (the franchisees) these rights often include exclusive access to a defined geographic area.

Continuing Relationship

- A franchisor provides a licensed privilege to do business and provides management and technical assistance and training in return for a consideration from the franchisee.

Pattern or Method of doing Business

- a franchisee is granted a right to offer, sell, or distribute goods or services under a marketing format as designated by the franchisor.

Business Format Franchising

- concerns the primarily elements of the business-opportunity approach to franchising. This franchising involves the format to be used by a franchisee in providing the franchisor's product or service line to the customer.

Internal market Information

- data from controllable activities of the franchise system. A well-designed internal market information system tracks the primary elements of the franchise distribution mechanism and the important facts about product sales.

Franchise opportunity

- three components - a trademark, logo, use of a product or services, following a Marketing Plan, and payment of a royalty fee - constitute the essence of a franchised business.

Jim Peterson also reports five basic steps on motivating and developing employees

1.Improvement-oriented attitude 2.Measuring everyone's performance 3.Evaluation 4.Feedback 5.Recognition

10 commandments of running a successful business

1.Leadership 2.Staying with the business one understands 3.Developing and maintaining a unique niche 4.Keeping firsthand touch with the customer 5.Relentless pursuit of management principles and fundamentals 6. Organization 7. Freedom from government intervention 8. Strong and fiscal responsibility 9. Strategic development 10. Picking winners

New Product Development

A franchised firm cannot rely in the long run on its initial products. Customers want and expect new or improved products, so the firm must introduce new products to replace those with limited or declining consumer interest.

Licensing Relationship

A franchisor of a product, services or business method grants distribution rights to affiliated dealers (the franchisees) these rights often include exclusive access to a defined geographic area.

Complex legal documents:

All franchisors that are registered in the United States must have a Franchise Disclosure Document (FDD).All franchise buyers must be presented with the FDD before they are permitted to purchase a franchise business.

New Franchise

Collective purchasing power

New business

Independence and creative freedom

Incremental Innovation

Innovation to product or its packaging using existing products that provides an incremental consumer benefit

Business Format Franchising

It concerns the primarily elements of the business-opportunity approach to franchising. This franchising involves the format to be used by a franchisee in providing the franchisor's product or service line to the customer

Product and Trade Name Franchising

It involve from the time when suppliers made sales contracts with dealers to buy or sell certain products lines. In this relationship, the dealer acquires the trade name, trade mark, or product from the supplier

Franchisor

It is called a franchise typically involves the granting by one party to another party.

Quality

It is important for the management of the franchise to know how customers honestly perceived the quality of the product or service. is the customers perception of the product, and the customers perception is greatly influenced by the employee or server.

Organization Chart

It is particularly useful for showing these relationship as well as indicating the formal decision-making and communications channels.

Fee Element

It is required to make a payment to the franchisor (or an affiliate of the franchisor) as a condition of obtaining or beginning the franchise operation

A franchise business

It provides a detailed, step-by-step, business "blueprint." There are very specific rules that must be followed, including the use of approved signage, and marketing materials, hours of operation

False

T or F "Find something you love to do and you'll never have to work a day in your life." Harvey Mackoy

False

T or F A franchisee, before starting any business, determine if there is a price discount given for your product or service

True

T or F A good franchisee develop their marketing and business plans

True

T or F A successful franchisee's conduct their own marketing research

True

T or F As a franchisee, In order to stay in business, you have to make money

True

T or F As a franchisee, research is the single most important activity in making your decision

True

T or F Since the 1950's franchising has been the leading edge of business by showing impressive growth rates in overall sales and Market share

False

T or F Survey is the single most important activity in making your decision

True

T or F To make profit potential a franchisee consider to start a business, you have to have money

False

T or F To make profit potential a franchisee consider to start a business, you have to make money

Repositioning the Product

Target new customers, uses, or occasions with focus on benefits not previously identified with product/service

Fee Element.

The franchisee is required to make a payment to the franchisor (or an affiliate of the franchisor) as a condition of obtaining or beginning the franchise operation.

Trademark Element.

The franchisee operates his business under the franchisor's trademark or service mark or distributes goods or services associated with the franchisor's marks.

Operating system:

This is the system developed by the franchisor that enables the business to be easily replicated by franchisees. This includes standard operating procedures and methods.

Motivating and Communicating

Understanding people and how and why they behave as they do is a vital part of a franchisor's and franchisee's job

A non-franchise business opportunity

also provides a "blueprint," but it's usually not as detailed. There just aren't as many rules, when compared to a franchise. The actual contract that you're given to review prior to signing a business opportunity type of business may be one to two pages in length.

Business opportunity

an owner (producer or distributor) of a service or trademarked product grant right to an individual for local distribution and or sale of goods or services, and in return receives a payment or royalty and conformance to quality standards.

Convenience goods or services .

are frequently purchased, usually are low to competitively priced, and are staples, emergency, or impulse buys

Homogeneous shopping goods or services

are purchased less frequently than convenience products. The customer typically shops for the best bargain among goods or services that are considered highly similar if not the same quality. Thus, price tends to be the motive for purchase.

Directives

can be given in either written or oral form.

Heterogeneous shopping goods or services

category is the one where most franchise systems see themselves. The focus is on product or service qualities or characteristics with prices being a second level or a lower order concern to the purchaser.

Buying A New Franchise Disadvantages

costs more smaller profit margins lack of independence and freedom difficult to achieve redress if franchisor fails to meet obligations

Specialty products or services

include a wide array of possibilities. Franchised custom software services, wedding gowns, other formal wear, exclusive shoe wear, jewelry, optical services, consulting services, optical and oral surgery clinics, custom catering, and other service providers are few in number within a general market area, may be hard to find, offer unique features o the customer, and charge higher prices. Their promotional mix may be the most singular and focused of any-word of mouth with occasional news articles or public service sponsorships to keep the name of the firm in front of the community.

Product and Trade Name Franchising

involve from the time when suppliers made sales contracts with dealers to buy or sell certain products lines. In this relationship, the dealer acquires the trade name, trade mark, or product from the supplier.

Controlling

involves the determination of standards and methods of evaluating performance against those standards to appraise operating results.

Franchise Broker

is generally an independent third party who simply solicits prospective franchisees for the franchisor generally work for several franchisors at the same time and provide information to prospective franchisees concerning many franchising opportunities

Multiunit Franchising

is one who owns and operates more than one franchise

Organizing

is the coordination of human, financial, and physical resources deemed necessary to reach the objectives set forth in the planning phase.

Planning

is the primary responsibility of the owner-manager

Direction

is used to achieve the franchise organization's objectives while building an organizational climate conducive to encouraging superior performance

Perishability

means that a particular service cannot be inventoried or stored for a period of time.

Variability

means the random, or unwanted, levels of quality that the customer can receive as they purchase, receive, and consume the service.

External Market Information

needs are outside the realm of activities controlled by the franchise system. These information needs are usually associated with market issues, problems, and threats or opportunities. Researching problems of the market involves several steps. First, the problem, issue, threat, or opportunity must be carefully defined. Second, data collection plan is determined.

A franchise business

provides a detailed, step-by-step, business "blueprint." There are very specific rules that must be followed, including the use of approved signage, and marketing materials, hours of operation, etc.

Buying A New Franchise Advantages

reduced risk of failure easier to obtain financing research and development collective purchasing power start up assistance proven methods and products

A Franchise

refers the right to carry on a particular name or trade mark, according to an identified system, usually within a territory or at a location, for an agreed upon term.

Intangibility

refers to the lack of tangibility of a product or service such as what can be seen, touched, smelled, tasted or heard prior to purchase.

Inseparability

refers to the simultaneous production and consumption of a service.

Buying An Existing Franchise Advantages

the business is already up and running risk and uncertainty may be reduced the basic infrastructure is in place easier to obtain financing