SMALL BUSINESS MANAGEMENT

1
SMALL BUSINESS MANAGEMENT

• Chapter 6
• Franchising

2
History and Background of Franchising

• Most rapid growth in North America since the
  1950s.
• 1960s Franchisee associations formed and
  legislation to protect rights of franchisees and
  franchisors.
• More than 40 of all retail sales resulted from
  franchising in North America in the last decade.

3
What Is Franchising?

• Manufacturer-Directed Franchise
• ____________
• Wholesaler-Retailer-Directed Franchise
• ____________
• Franchising Company
• ____________

4
Franchising Terms

• ____________
• An entrepreneur whose power is limited by a
  contractual agreement with a franchisor
• Franchisor
• The party in the ____________ contract that
  specifies the methods to be followed and the
  terms to be met by the other party

5
Franchising Terms

• Product and Trade Name Franchise
• Grants the right to use a widely recognized
  product or name
• Business _______ Franchise
• Provides an entire marketing system and ongoing
  guidance from the _______
• Piggyback Franchising
• The operation of a retail franchise within the
  physical facilities of a host store

6
Reading the Fine print

• Briefly discuss the advantages and disadvantages
  of franchising that are identified in this
  example.
• What could prospective franchisees do to reduce
  the risks of the problem identified in this
  example?

7
Advantages of Franchising

• Proven _______ for the product or service.
• Services the Franchisor May Provide
• 1. Selection of _______
• 2. Purchase or Construction of Site, Buildings,
  and Equipment
• 3. Provision of _______

8
Advantages of Franchising

• Services the Franchisor May Provide (cont.)
• 4. Standardized _______ of Operating
• 5. Advertising
• 6. Purchasing _______
• 7. Training

9
Potential Disadvantages of Franchising

• Lack of _______
• Cost of the Franchise
• Unfulfilled _______
• Restrictions of the Contract
• Product or Service Offered
• Line Forcing
• Termination

10
Potential Disadvantages of Franchising (cont)

• Saturation of the _______
• Lack of Security
• Cost of _______
• Effectiveness of Promotion
• Exaggeration of _______ Success

11
Evaluation of a Franchise Opportunity

• Franchisor
• Industry _______
• Professionals
• Other Franchisees
• Government Agencies
• Additional _______ to Investigate

12
The Entrepreneur as Franchisor

• What businesses can be franchised?

13
The Entrepreneur as Franchisor

• How does one become a franchisor?
• 1. Establish a prototype.
• 2. Prepare the necessary information.
• 3. Investigate the legal requirements.
• 4. Develop a planned and standardized program of
  operations.
• 5. Obtain adequate financing.

14
Franchising in the Future

• Piggybacking Two or more franchise operating
  in one outlet.
• Branchising Converting existing chain outlets
  to franchises.
• Mini-franchises Small satellite versions of
  larger franchises.
• Growth of service-based and home-based franchises

15
Franchising Frauds

• The Rented Rolls Royce Syndrome
• The Hustle
• The Cash-Only Transaction
• The Boast
• The Big-Money Claim
• The Couch Potatos Dream
• Location, Location, Location
• The Disclosure Dance

16
Appendices

• A. A Sampling of Franchises Operating in Canada
• B. Trade Associations and Government Departments
  that Assist Franchisors and Franchisees
• C. A Checklist for the Potential Franchisee
  Questions to Answer Affirmatively before Going
  into Franchising
• D. Franchise Contract Clauses