FRANCHISING-MIDTERM Flashcards
What is franchising?
Franchising is a business model in which the owner of a trademark, brand, or business system (the franchisor) grants the right to use that brand and operate a business following specific guidelines to an individual or entity (the franchisee).
Acronym meaning: It refers to the intricate structure and elements involved in franchising.
Who is a franchisor?
The business or individual who owns the rights to the brand and the franchise system.
Who is a franchisee?
The individual or business entity that purchases the right to operate a franchise unit.
What are the key elements of franchising?
- Trademark/Brand Licensing
- Standardized Operations
- Ongoing Support
- Fees
What historical example is cited as one of the first examples of modern franchising?
Singer Sewing Machine Company in the 1850s.
Which fast-food chain is credited as one of the first well-known franchises in the early 20th century?
A&W Root Beer.
What iconic franchise emerged during the post-World War II boom?
McDonald’s franchise in 1955.
What is the estimated number of franchise establishments around the world today?
750,000.
What is Product/Trade Name Franchising?
The simplest form of franchising, granting the right to sell or distribute the franchisor’s products.
List key characteristics of Product/Trade Name Franchising.
- Focus on Products/Brands
- Minimal Operational Control
- Franchisee Autonomy
What type of franchising is the most common in industries like fast food and retail?
Business Format Franchising.
List key characteristics of Business Format Franchising.
- Comprehensive System
- Standardized Operations
- Franchisor Support
- Control Over Operations
What are hybrid models in franchising?
Franchises that incorporate elements of both Product/Trade Name and Business Format franchising.
What are the franchisee’s role?
- Operating the Business
- Following the Franchise System
- Financial Management:
- Marketing and Promotion:
- Managing Inventory and Supply Chain
- Maintaining Communication
What financial responsibilities does a franchisee have?
- Investment
- Royalties and Fees
- Profitability
What is the franchisor’s primary role?
Providing the business model and system that franchisees follow.
What kind of support does a franchisor typically provide?
- Initial and ongoing training
- Operational help
- Marketing advice
List pros of being a franchisee.
- Proven Business Model
- Brand Recognition
- Training and Support
- Marketing and Advertising
- Easier Access to Financing
- Bulk Purchasing Power
- Lower Failure Rate
List cons of being a franchisee.
- Limited Control and Flexibility
- Ongoing Fees and Royalties
- Initial Investment
- Dependence on Franchisor’s Reputation
- Renewal and Exit Challenges
- Lack of Autonomy
- Competition Within the Network
List pros of being a franchisor.
- Rapid Expansion
- Shared Risk
- Revenue from Royalties and Fees
- Motivated Operators
- Brand Control and Consistency
- Economies of Scale
- Access to Local Knowledge
List cons of being a franchisor.
- Limited Control Over Operations
- Franchisee Compliance
- Conflict with Franchisees
- Reputation Risk
- Initial Setup Costs
- Dependence on Franchisee Performance
- Potential for Franchisee Saturation
What is a trend in the global franchising landscape?
Shift towards non-food franchises.
What is multi-unit franchising?
Owning and operating multiple franchise units.
What is master franchising?
Granting a franchisee exclusive rights to develop and operate franchises in a specific territory.
What was the impact of COVID-19 on franchising?
Significant shifts in operations and consumer behavior.
What are key demographics of franchise businesses?
- Age Group
- Income Level
- Geographic Location
- Lifestyle and Behavior
What target market does the food & beverage industry primarily focus on?
All age groups, with a focus on Millennials for fast-casual restaurants.
Which demographic is primarily targeted by fitness franchises?
Primarily Millennials and Gen Z.
What key factors drive the education and childcare franchise market?
- Parents value quality options
- Growing demand for supplementary education
True or False: Franchisees are responsible for maintaining communication with the franchisor.
True
Fill in the blank: The _______ is responsible for drafting the franchise agreement.
[franchisor]
_____________ is the most common and well-known type of franchising, particularly in industries like fast food, retail, and hospitality. In this model, the franchisee receives the entire business format
Business format franchising
franchisee gets access to the _______, which typically includes the franchise’s marketing plans, operational procedures, supplier networks, training programs, and brand identity.
entire business system
What key characteristics business format that the franchisee gets access to the entire business system, which typically includes the franchise’s marketing plans, operational procedures, supplier networks, training programs, and brand identity.
Comprehensive System:
What key characteristics business format that The franchisee is required to follow the franchisor’s guidelines and adhere to a proven business model. This includes maintaining operational procedures for product or service delivery, quality control, and customer service.
Standardized Operations:
What key characteristics business format that The
franchisor provides ongoing support, which may include training, advertising, site selection assistance, and operational audits.
.
Franchisor Support:
What key characteristics business format that The
Franchisees are expected to run the business in the exact manner prescribed by the franchisor, including the layout of the store, staffing, supply chain processes, and marketing strategies
Control Over Operations:
What Key Characteristics of Product/Trade Name Franchising that the franchisee is authorized to sell the franchisor’s products or services but may not have to follow a strict operational system.
Focus on Products/Brands: The
What Key Characteristics of Product/Trade Name Franchising that the franchisor’s involvement is mostly limited to supplying products, such as retail goods or machinery, and ensuring the franchisee sells these goods under the franchisor’s trademark or trade name.
Minimal Operational Control:
What Key Characteristics of Product/Trade Name Franchising that the Franchisees have more flexibility in terms of day-to-day operations. They are generally not required to adhere to the same level of operational procedures or management systems as in other types of franchising.
Franchisee Autonomy:
What are the other common business models:
- Independent Business
- Licensing
- Joint Venture
- Direct Sale/MLM
- Corporate Owned expansion
wHAT ARE THE Franchisor’s Role
1.Providing the Business Model and System:
2.Training and Support
3.Marketing and Advertising
4.Setting Standards and Guidelines
5.Providing Products and Services
6.Territorial Management and Expansion
7. Legal and Administrative Oversight
