chapter 16 intro to hospitality
from a franchisor's point of view, what are the advantages and disadvantages of franchising?
(advantages) -little or no capital is required to expand -transfer risk -franchise is likely to be accepted by community (disadvantages) -gives up the profits, settling for royalties instead -surrenders a certain amount of control
what are two types of franchises?
-product or trade-name franchise -business format franchise
According to a poll by the Development Group, why do franchisees purchase a franchise?
-self management -financial independence -career advancement -new skills/training -long-term investment that will appreciate in value
what is the Uniform Franchise Offering Circular?
-this prospectus is a disclosure document that informs the franchisee about certain vital aspects of the franchisor and the franchise agreement before the agreement is signed
a prospectus that outlines certain vital aspects of a franchisor and its franchise agreement. By law the UFOC must be given to a potential franchisee before the franchisee signs the franchise agreement
Uniform Franchise Offering Circular (UFOC)
a supplier/dealer arrangement whereby the dealer (franchisee) sells a product line provided by the supplier (franchisor) and to some degree takes on the identity of the supplier
product or trade-name franchise
how are initial franchise fees calculated by the franchisor?
they are calculated by assigning a monetary value to the following: -the franchisor's goodwill -the value of the new franchise unit's trading area or territory -the average cots of recruiting a franchisee -the cost of training a franchisee -the costs of signs, ads, plans, and other aids
refers to (1) the authorization given by a company to an individual or another company to sell its unique products and services, or (2) the name of the business format or product that is being franchised
franchise
the individual or company granted a franchise
franchisee
a continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising, and managing, in return for a financial consideration from the franchisee
franchising
the franchise company that owns the trademark, products, and/or business format that is being franchised
franchisor
From a franchisee's point of view, what are the advantages and disadvantages of franchising?
(advantages) -site-selection assistance -credit -construction expertise -fixtures and equipment assistance -training -opening support -promotional assistance -economies of scale -ongoing support (disadvantages) -restrictions -unwanted products or procedures -unwanted advertising -unprotected territories -cancellation -inadequate training
how did I.M. Signer, General Motors, and Coca-Cola contribute to franchising?
(pg 480) I.M Singer & Company used franchising to develop a network of sewing machine dealers -under the singer concept, a dealer was allowed to open a singer sewing machine store in return for an agreement to sell only singer machines and supples -dealers also provided service in the form of sewing lessons -the first coca-cola franchise was granted in 1899. -franchising was necessary because coca-cola was packaged in a unique glass bottle that consumers paid a deposit for and returned to the company -it was expensive to ship bottled drinks all over the country -in order to expand, coke gave franchisees the right to build coke bottling plants in return for purchasing cokes's bottles and syrup. -general motors -established dealerships to sell and service their cars
placing a branded hotel or restaurant in the vicinity of other hotels or restaurants with the same or a related brand
encroachment
an ongoing business relationship between a franchisor and a franchisee in which the franchisor sells its products, services, trademark, and business concept to the franchisee in return for royalties and other franchise fees
business format franchise
