Franchises Flashcards
What is a Franchise
A Franchise is an agreement between an established company ( A franchiser ) and a franchisee ( the person who uses the brand name ) in which permission is granted to conduct business in a prescribed manner set by the franchiser.
What is a Franchisee
The Franchisee as an obligation to pay “ Royalties” fee to the franchisor periodically but the franchisee in return gains from the reputation and business expertise or management of the franchiser.
Who is a Franchise
Is a person who use the brand but they have they have to pay a fee.
In a franchise, the owner or operator is referred as an franchiser. The franchise has a “Parent Company “ . The parent company or franchiser is the owner of the trade mark product or service.
Example of a franchise
KFC, Burger king , Mc Donalds, Wendy’s etc
Who is a franchisor
A franchisor is a person that owns the brand.
Characteristics of a franchise
- Brand and Trademarks: Franchisees operate under the franchisor’s established brand name, trademarks, and logos, benefiting from the recognition and reputation of the brand.
- Licensed by parent corporation .
- Receives assistance from the parent corporation in terms of profession advise .
- Training and Support: Franchisors provide initial training and ongoing support to franchisees, helping them to understand and implement the business model effectively.
5.Territorial Rights: Franchise agreements often include territorial rights that limit competition from other franchisees within a specific geographic area.
Advantages of Franchise
- Can use in internationally known brand name
- Gain sales and visibility
- Receives advise and training in business operation
- Can make customers
Disadvantages of Franchise
- Must make regular payments to franchiser
- Loses some independence in deciding how to run the business.
3.Royalty Payments: Franchisees are required to pay ongoing royalties to the franchisor, reducing their profit margins.
- Dependency on Franchisor: Franchisees rely on the franchisor for support, training, marketing, and supply chain management, and may be adversely affected if the franchisor fails to fulfill its obligations.