Franchising

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Title: Franchising

1
Franchising

Franchising
A marketing system revolving around a two-party
agreement, whereby the franchisee conducts
business according to the terms specified by the
franchisor
Franchisee
An entrepreneur whose power is limited by a
contractual agreement with a franchisor
Franchisor
The party in the franchise contract that
specifies the methods to be followed and the
terms to be met by the other party

2
What is a FRANCHISE?

3
Top 20 Franchises for 2011

4
The 20 Fastest-Growing Franchises - 2011

Source Entrepreneur.com, 2011 Fastest-growing
franchises
5
Top 12 Low-Cost Franchises - 2011

Bonus Building Care
Commercial cleaning 9.02K 41.92K
System4
Commercial cleaning 5.46K 37.75K
ServiceMaster Clean
Commercial , home disaster cleaning 47.86K
161.13K
Cruise Planners/Amer Express Cruise tour
travel agency 1.6K 19.29K
Chem-Dry Carpet Cleaning Carpet, drapery
upholstery cleaning tile stone care 27.85K
122.65K

6
The Pros and Cons of Franchising

7
Franchisor Controls on Franchisees

8
An Attractive Franchise Opportunity Includes - 1

Registered trademarks
Successful prototype stores with a track record
of profitability and a positive reputation
A business that can be systematized so that it
can be easily replicated.
A product or service that can be successful in
many different geographic regions.

9
An Attractive Franchise Opportunity Includes -
2

An operations manual that specifies all the
functions of the business and their associated
policies
A training and support system
Site selection criteria and architectural
standards
A detailed prospectus that spells out the
franchisees rights, responsibilities, and risks.
The Federal Trade Commission requires
disclosure...Uniform Franchise Offering Circular
UFOC

10
Franchise Disclosure Requirements

Rule 436 of the Federal Trade Commission
Uniform Franchise Offering Circular (UFOC)
A document accepted by the Federal Trade
Commission as satisfying its franchise disclosure
requirements
Litigation and bankruptcy history
Investment requirements
Conditions that would affect renewal,
termination, or sale of the franchise
http//www.ftc.gov/bcp

11
Franchising Arrangements

Trade name franchise
agreement that provides to the franchisee the
right to use the franchisor's trade name and/or
trademarks
Product distribution franchise
agreement that provides specific brand name
products which are resold by the franchisee in a
specific territory
Business format franchise
agreement that provides a complete business
format, including trade name, operating
procedures, marketing, and products or services
for sale
Piggyback Franchise
A retail franchise operation within the physical
facilities of a host store
Area Developer/Master Licensee
Firms or Individuals that obtain the legal right
to open several franchised outlets in a given
area

12
Before Buying a Franchise
ASK QUESTIONS
13
Questions to Ask Before Buying a Franchise

Does the franchisor have an excellent reputation
in the industry?
Is the franchisor in partnership or any other
legal relationship with another franchisor? If
so, how will the franchisee be protected should
that relationship fail?
Is the franchisee required to do anything that
appears questionable from a legal or ethical
perspective?
Under what circumstances can the franchisee or
franchisor terminate the franchise agreement and
what are the consequences to either party?
Will the franchisor grant an exclusive territory?
Is that area subject to reduction or
modification? If so, under what conditions?

14
Questions to Ask Before Buying a Franchise - 2

Will the franchisor reveal the certified
financial figures for one of its franchises and
can those figures be verified with the
franchisee?
Will the franchisor provide a management training
program, an employee training program, public
relations and advertising support, or credit?
Does the franchisor assist in finding a suitable
location?
What is the financial health of the franchisor?
Can financial statements be verified?

15
Questions to Ask Before Buying a Franchise - 3

What is the track record of the franchise?
Does the franchisor conduct an in-depth
investigation of the franchisee to assure that he
or she has the necessary skills and financial
requirements to operate the business
successfully?
How much capital will be required to start and
operate the business to a positive cash flow?
Does the initial fee include an opening inventory
of products and supplies? What do royalties pay
for and how are they calculated?

16
Questions to Ask Before Buying a Franchise - 4

Can you transfer your franchise license to
someone else? When and how?
How can you terminate the contract? Under what
circumstances can this be done?
Can the franchisor terminate the contract? Under
what kind of conditions?
What disclosures are you required to make? What
disclosures is the franchisor required to make?

17
Where to Find out about Franchises