Marketing : Franchising - Research Paper Example

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Franchising Franchising has become a common marketing practice in today’s world. Franchising is basically a practice in which another firm’s business model is used but this is mostly done for successful firms. Franchising is a practice used as an alternative to building chain stores…
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Marketing Paper: Franchising
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Download file to see previous pages Franchising emerged as a new form of retailing (Bardsley, N., & Key Note Publications. 2000; Kotler, P. 2000) Franchising is a business model in which many different entrepreneurs share a single and common brand name. The person who owns a franchise is known as franchisee and the company who allows the entrepreneur to open up a franchise is known as franchisor. The parent company allows the franchisee to use its brand name and trademarks and also the strategies but in return charges a fee. The franchisee needs to pay a fee for using the parent company’s trademark and strategies etc. The franchisee also needs to pay royalties based on the revenues that it has generated from a certain franchise (Kotler, P. 2000) As explained earlier that franchising is form of retailing and it differs from all other form of retailing methods. Franchises are differentiated by three characteristics. First of all the franchisor is the owner of the trademark and licenses it to the franchisee in return for royalty payments. Second characteristic is that the franchisee pays for the right to be part of the system of the franchisor. And thirdly the franchisor is the one who provides its franchisees with an operating system or a system for doing business (Kotler, P. 2000) Franchising has helped in globalization. Franchising is a practice that has been used by various companies to reach the corners of the world. Companies use this practice of franchising when they want to expand globally. It has helped in the expansion of the businesses across the globe. Previously it was very costly for the businesses to expand globally. Franchising has reduced the cost of expansion. It is a faster and cheaper form of expansion. It is a cheaper form of expansion for the parent company because in this form of expansion it do not have to add a company-owned store but instead the stores are owned and operated by a third party (Czinkota, M. R., Ronkainen, I. A., & Tarrant, J. J. 1995; Kotler, P. 2000) Franchising does not work for all forms of businesses. Businesses for which franchising is a good retailing practice have several characteristics. These characteristics include that the business must have a good track record of profitability, the business could be easily duplicated, also that the business should have a detailed system of procedures and processes. Other characteristic include that the business should be unique and follow some unusual concept, also that the business should have a broad geographic appeal and it should be relatively inexpensive and easy to operate as well. It is not necessary for the businesses to have all these characteristics in order to follow the practice of franchising. Even if the business has any one of the mentioned characteristics, the business can incorporate the franchising into its business model (Bardsley, N., & Key Note Publications. 2000) The franchising business model is used among many industries but it is most popular amongst the fast food chains, hotel industry and the other restaurant industries. Examples of global brands that have entered into the business model based on franchising include McDonald’s, KFC, Subway, Burger King, etc. Franchising is a form of expansion but there is one very important thing that needs to be taken into consideration. Franchising is affected culturally. A particular franchise serves particular vicinity within which it is based. A franchise carries the name of a global brand but it needs to adjust according to the cultural norms within ...Download file to see next pagesRead More
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