Have I Got a Franchise for You - Term Paper Example

Have I Got a Franchise for You? Definition This is a network of interdependent businesses where a number of people share. It is aimed at getting and keeping customers as it s more of a system that creates an image in the minds of the people both in the present and in the future about how beneficial the products of the company are. Franchising distributes the products and services that satisfy the needs of the customers. The customers share on the brand identification, the successful method of doing business and on the proven system for marketing and distribution. Therefore, franchising is the alliance formed as a strategy to dominate the market where he involved has specific relationships and responsibilities. On the other hand a franchise is a business where the owners or the franchisers sell their business rights to third parties called franchisees. Some of the big franchises are McDonalds, UPS and Subway [Purvin, 2008]. While investing in a franchise, the franchisee is required first to pay a fee to acquire the rights to the business, training and equipment required for that franchise. This is in terms of an ongoing payment according to how they will agree. As it can either be monthly or even on a quarterly basis which is a percentage of the gross sales for the business. The franchiser will direct the franchisee on the way to open another replica franchise but will not have such rights or powers as would have had had he opened his own business. After the signing of the contract, the franchisee will go on and open up a replica of the operation of the franchise business, in the direction of the franchiser. The franchisee therefore, will not possess as much in terms of control over the business operation as he/she would have over theirs, but may benefit from investing in an already-established brand. It is important to note that the franchiser does not only enjoy the right to dispose the products but also to use the processes that have already been set in place by the business or franchiser and therefore is required to keep the processes, the logo and also the signs and the uniforms. Though this is true, the franchisee is to remain independent owner of the business. To begin a franchise, it will be important for the franchiser to contact a franchise attorney who will assist in making a viable franchise decision. Franchising allows one to grow the business quickly due the simultaneous opening of several units. The franchisee needs to provide the operators with ongoing support even though he technically does not own the franchise in cases like the obtaining of finances and in finding the site locations for the franchises. The first franchises were actually started in the 19th century and some of the world’s famous and fast growing businesses are franchises. These include the companies like the McDonalds. Types of franchises 1. Business to business service In this type, the managers and the retail side share some of the characteristics. The franchise manages the operations part but does the selling. Is out to handle the customers and to sign their contracts but not to handle the day in the day out operations like receiving phone calls some of these like that of consultants can actually be done at home. 2. Retail franchise This involves itself with walk in retails services and therefore can sell the products of the company during the retail hours. This involves printing, food communication and fashion. These types of franchises need adequate staffing due to the many operations but they are owner operated. 3. Investment franchise In this franchise, a lot of capital is invested by the franchisee in the high cost franchise systems. The franchisee operates this at arms length where a management team operates this on his behalf. The franchisee normally has a lot of experience in managing a large team. Examples of these are the restaurants and hotels. 4. Management franchise This is where the franchise is responsible of managing and coordinating the team of operatives and the development of the business. Much of the turnover is obtained from the trading between the businesses but not from the retail activities. The franchisee may operate a number of the businesses or may even be responsible for a whole region. 5. Job franchise In this franchise, the franchisee purchases the right to operate a business. The business takes the form of purchasing the products, distribution and the delivery of the products of the services and goods. The operators initially operate individually but as the business grows, there comes the need for the employment of new staff. The basic thing in this franchise is that the business may be home based, mobile or may require just a small office for its operations. Examples of this are the motorist services or the security service. This is also known as single operator franchise. [Bertrand, 1999] 6. Executive franchises This is a franchise that is known for extending consultant services. The services offered are on project management and financial matters and decisions are mostly made in a board room. The premises are not important in this case as the services can be offered out in the clients premises or where the person offering the services may not require to travel, this can be home based. Some of the services offered are on cost management, stress and accountancy management. 7. Sales and distribution franchise This is a type of franchise that the franchisee is always on the move to distribute the products of his territory. The franchisees normally do this alone but the growth of the business eventually causes him to invite new staff to assist in the distribution. Some of these products are like drinks and foods for pets. 8. Master franchise licensees In this type of franchise, the franchisee operates exactly like the franchisor. He duplicates all the functions and his coverage is very great as it may cover a whole region leave alone a territory. To be given this right, the franchisee must be a very experienced person and his business must have a good record where it can produce a good business plan that is just like that of the franchisor. Laws that govern franchising This industry is highly regulated and the state and federal laws. These have been put in place to govern the disclosures of the franchisees, their registration and their restrictions as well as the termination and restrictions of the franchisees. Some of these laws include: Franchise disclosure and laws of registration There are laws of the state and federal which govern the conditions under which the franchisee is to accept the offer. These laws are meant to protect him even by providing the necessary information that he may require to form an informed type decision upon the business and whether to purchase the franchise or not as they are perceived to lack the information that they may require to for an informed kind decision upon the investment purchase and therefore bestows obligations on the franchisor and not the franchisee. However, these obligations are just applying to the franchisor before the completion of the sale of the franchise but not after that. In this regard, he has no obligation to update the franchisee on anything once he has signed the agreement. There is a federal law that states the way a sale of a franchise is to be conducted this law is called “Disclosure Requirements and Prohibitions Concerning Franchising” which covers 50 states. This law requires that the franchisee be furnished with a disclosure document within the required time frames [Garner, 2001]. It does not require that the franchisor registers its franchise before the franchisor begins selling the franchises. The state laws that govern the sale of franchises state which state the disclosure or registration and the second are business opportunity registration. This also require that there be complete registration of the franchise before the franchisor can sell the franchise and therefore cannot grant registration of the franchises before the franchisor complies with the registration of the franchise requirements. These relationship laws provides a fair procedure in which the activities of the franchise are carried out especially those that involve the franchisee and the franchisor so that all are going to benefit or if all have to lose, then it not be that the franchisee in not aware of this. It also states the time limit in which the franchisor should comply to as far as termination of the franchise is concerned and should inform the franchisee in the time frame provided as well as provide a good cause for the same to happen. Where it happens that there are claims due to unfair practice by the franchisor, the franchisee must prove that he is an entity that is protected under the law, he sought to purchase something of value which here it is the franchise and also that these are the source of the complaint. If in any case succeeds in this, then ha has the following remedies [Bertrand, 2000]: An injunction preventing the franchisor from his misconduct Compensation for the damages caused by the franchisor for the actual damages Damages as a way of punishing the offender for his acts. These are called punitive damages which are almost three times those of the compensatory The recovery of attorneys’ fees Recovery of costs in the cost of litigation The franchisor may need the following before he can actually agree on the terms. Planning for resources and the exploratory steps sensibly like the accommodation, management, potential partners and the flights. Preplan and implement a sensible trade mark protection program. This will be the foundations of the right to be granted overseas and to do this in a strategic way so that to reduce the opportunities of duplicators. Get the right partner as a country. Take time to explore the different markets and focus on the future prospects because of the limited resources. Be proactive to identify the franchisees that are potential; by also carrying out a background search on them and not relying on unsolicited sources. The target country must be in a position to accept what you are offering, checking their habits and their patterns will be required. Have good negotiation strategies in place. Ensure that the advice from the right sources is available which will include the legal advice. Advantages of franchising The franchisee will have the ownership mentality and will dedicate his time, money and resources for the success of the business. This is because of dealing with different lines of products. There will be a brand’s recognition in the minds of consumers and therefore will tend to be loyal to the business through the identification of the business and the strong retail marketing campaign strategy and this will build the value of the brand. Where franchising is involved, it always brings in the superiority of the brand because of the unique distribution channels and the uniformity of the retail presentations and methods of marketing. Effective participation of the franchisee will be obtained since the business’ success almost entirely relies upon them. They will come up with new ideas and as well alert the franchisors on the different needs that are arising. The advertising dollars are pooled together bringing about competition. This is because the franchisees are required to participate in the retail marketing and the local adverting campaigns. In this effect therefore, the system wide marketing support is paid for by franchises. Disadvantages of franchising There are many legal expenses involved in the uniformity of the franchises and in the offering of the circulars. If separate legal entities are used, then this will require additional legal costs. The laws that accompany franchising are technical in their application.. This has necessitated that before franchising is done, that the franchisees are educated. There are technical; legal constraints that mostly affect the franchisor especially when he wants to terminate the franchise. These are financial and some are for system compliance. There are controls issues as relates to the quality and these are compared with the company owned operations. Conclusion While concluding, one can now see that franchising involves a network of businesses that are independent to each other and a number of people share. The main aim of franchising is getting the image that consumers will uphold with a higher reputation. Types of franchise business-types may include retail franchise, business to business service, investment franchise, job franchise, management franchise, executive franchises, master franchise licenses, and sales and distribution franchises. These aforementioned franchises need laws and regulations to run. They also have various merits and demerits as presented in the study. References: Bertrand, Marsha (2000). Have I Got a Franchise for You! Be Your Own Boss, Easy Money: Fraud! How to Protect Yourself from Schemes, Scams, and Swindles. Amacom. Bertrand, Marsha (1999). Fraud! How to Protect Yourself from Schemes, Scams, and Swindles American Management Association. p 307. Garner, W. Michael (2001). Indiana: Franchise desk book: selected state laws, commentary and annotations ; American Bar Association. Purvin, Robert (2008). The Franchise Fraud: How to protect yourself before and after you invest. John Wiley & Sons. p 307. . Read More