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"Examine the role of Business Format Franchising in multinational businesses and define the effect of International Franchising on globalisation"
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The franchisor-franchisee relationship is based on mutual support and trust. In this relational exchange, they share benefits and costs (Grunhagen & Dorsch, 2003). The franchisor provides support, technology and advice to the new franchisee and guarantees continued support. In exchange, the franchisee has to pay an entry fee and a continued royalty on sales and advertising fees for regular services (Inma, 2005). Franchising is different from other forms of business. The franchise owners try to assess the value they receive in exchange for the sum paid. They would remain in the relationship as long as they perceive that they receive a fair value for the payments made to the franchisor. In this relationship, the franchisor or the principal does not invest its own fund in the local service unit because the responsibility of maintenance, construction and management of the local operation lies with the franchisee (Fladmoe-Lindquist & Jacque, 1995; Welsh, Alon & Falbe, 2006).
The business format of franchising was based on two dominant theories – the agency theory and the resource scarcity theory (Inma, 2005). Based on the resource scarcity theory, as the company anted to expand and resources were scarce, franchising became a means of obtaining capital. In addition, it also eased managerial constraints upon the growth of the medium and small-sized firms. The agency theory viewed franchising as a means of efficiently controlling the problems that could arise due to the difference between the agent and the principal. Thus, these theories are based on the view that it eliminates the constraints that a firm could encounter in expansion.
Although franchising originated in France, today Australia is the most franchised nation per head of population in the world. A franchise organization is claimed to be a hybrid form and has complex contractual arrangements. However, the franchised system can have hybrid forms as well as hierarchy firms (Inma, 2005). This
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After Riyadh and Jeddah, Dammam stands as the third largest city in Saudi Arabia. Dammam provides excellent convenient facility for the purposes of travel. There is a great demand of fashionable clothes. Thus, opening a clothing store which will look to import clothing for men as well as women of different ages at cheap prices from China will provide a good business opportunity in the city.
The franchising package would include strong branding, full training in procedures, and full launching support for which a franchisee fee is paid (as percentage of his turnover). This expedites the franchisor's continue support and promotion of the brand (IFM 2005).
"During the 1990's in the United states franchising became the most popular method of expanding commercial retail stores quickly with limited capital risk"(Bradach 1998) (Montagu, 2001). Franchising is characterized by locally owned outlets which deliver services according to a standardized model.
However the modern conceptualization of the business organization as a socially responsible outfit has gone so far as to create a different image. Fast food franchises operate in a highly competitive environment local fast food outlets claiming to sell identical products compete against them.
Dismantling of communist political regimes in the erstwhile iron curtain countries hastened the path of globalisation and made way for the emergence of the bulkiest chunk of international market viz. China, for all global marketers alike. This included top branded goods and services.
This means both the brand-name appeal and a proven track record.
Although the Pipe Dreams probably can not be considered widely known and long-established brand, it should already have gained popularity within its target market audience. Therefore, Ralph can capitalize on brand equity of Pipe Dreams trademark and use the franchisor's name as a drawing card for his own newly established tobacco shop.
According to McGoldrick, ‘The customers and their needs should play a central role in all business activities’ (McGoldrick, 2002). In the present market scenario a more aggressive approach to market its goods and services need to be adopted to meet the challenges of the
defines the franchising as “a method of market expansion utilized by a successful business entity wanting to expand its distribution of services or product through retail entities owned by independent operators using the trademarks or service marks, marketing techniques, and
The owner has a plan to start up the business with four full time employees; a chief chef, chef, helper (for grocery, cutting and cooking) and service man. It has been estimated that the business would expand
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