Franchising

Group 440 By Aygun Hajiyeva

History of Franchising

The concept of franchising as we know today

1st started in Germany

In 1851, Singer Sewing Machine Co. began

granting distribution franchises for its sewing

machine. Thus began the modern concept of

franchising

The root word “Franchise” comes from old French meaning privilege/freedom.

Franchise system

Franchise Franchisor Franchisee

A Franchise is a license granted by a business

to another business to make and sell goods/

services

A Franchisor is the owner of the business who

grants the license

A Franchisee is the person who purchases the business name

Types of Franchise

Business Format

Franchise

Product or Trade name Franchise

dealership

Unit Franchise

Master and Regional

Franchises

Business Format Franchise

The most popular form of Franchising

A Franchisor teaches to the franchisee the

entire businesses format

Allows using trademark

Advertising

Fast food restaurants are good examples

Product or Trade name Franchise

Only involves product

Manufacture grants a franchisee the right to

sell its product but with no method of doing

business

Allows using trademark

Dealership or Distributorship,

Licenses, Agencies

Allows to sell Franchiser product under their

own trademark

Own the rights to sell products on behalf of a supplier

Manufacturing and unit Franchise

One of the lesser-known franchise structures

is called a manufacturer franchise

The franchisee would only be responsible for

running one unit

Master Franchisee

A Master Franchisee is granted the rights to a

substantial territory, usually a whole country

Regional Franchisee

In a Geographically large area Master

Franchisee may decide to appoint Regional

Franchisee

Multiple Franchisee

Some Franchisees operates not just one unit but several

Advantage of Franchise

Increase number of outlet with minimum

capital

Name recognition

Running small business under Franchise

name is very beneficial

Big Business help in corporate marketing

Proper and effective marketing tactic

Disadvantage of Franchise

Frightening Franchise Fees

Outrageous Royalty Fees

Bloated Raw Material Cost

Most Franchises don`t provide financing

Competition Creep

A Creative Black Hole

Complex Procedure