BCEN 2900 ENTREPRENEURSHIP Chapter 6 Franchising
Jan 01, 2016
BCEN 2900ENTREPRENEURSHIPChapter 6Franchising
Franchises
One firm already has a successful product or service
Offers its trademarks and patented business processes to another for… Initial franchise fee and Ongoing royalties
Growth in Franchise Impact
Source: McGrow Consulting, www.mcgrow.com/growth.htm
Entrepreneurs
Franchisees can be entrepreneurs The ones opening the franchise in their
local market
Franchisors can be entrepreneurs Different role of being a manager of
managers
EmbroidMe Franchise Video
Three Types of Franchises
Trademark franchise Franchisee can buy right to use trademarked business
name – does not have to buy product from parent
Distribution Franchise Use the trade name, sell the parents’ products
exclusively GM and Ford dealerships
Business Format Franchise Formula for doing business Training, support, advertising
Franchise Agreements
Single unit agreements Open one store
Area agreements Open several stores in one area, up to a
maximum Master franchisee: Can also sell
franchises to others in that area
How to Get Started - Franchisor
Develop a business plan for the franchises.
Consult an attorney or consultant that specializes in franchising
Prepare your policies, advertising, strategy, and management
Start to recruit and help franchisees!
Developing a Franchise
Franchise fee ($25,000-$100,000) Capital Requirements
Land Building Inventory Licenses
Royalty payment on gross income Advertising fees (on top of your ads) Other fees as agreed upon
How to Get Started - Franchisee
Decide on a good franchise opportunity Visit several outlets across its territory
and talk Visit an attorney Check the franchise’s references
Uniform Franchise Offering Circular Sign agreement and begin training Start your business!
Pros and Cons of Franchising Pros
Training provided Brand name
recognition Quality control Proven business
models Site selection help
Cons Fees for franchise Required startup
capital Restrictions on
management methods
Purchasing requirements
Rules and Regulations
FDD (Franchise disclosure document) must be offered to potential franchisees to review Dunkin Donuts FDD
Franchise agreements and documents must be attached to the circular as well
State laws for franchising apply as well
Beyond regulation: the ethics problems
Food for Thought
Two People Person A
Creative, spontaneous, thrives on adventure Person B
Disciplined, structured, organized
Which of these would be best suited for a franchise? Why?