franchising
WHAT IS AN FRANCHISE? The right given by one business to another to sell goods and services using its name.
Franchisee - A business that agrees to manufacture,distribute or provide a branded product, under the license by a franchisor.
Franchisor - The business that gives franchisees the right to sell its product, in return for a fixed sum or a royalty payment.
WHAT DOES THE FRANCHISOR PROVIDE? (BENEFITS)
1. Training to start the business
2. Equipment e.g vehiclse and shop fittings
3. Materials to make the products
4. A brand name with advertising
5. customers through advertising
6. Back up services (possible loans, insurances, call centre etc)
7. Exclusive area (specific area where there is no direct competition with another franchisee)
WHAT DOES THE FRANCHISOR GAIN? (COSTS TO THE FRANCHISEE)
A lump sum of money from the newcomer when they set up
A percentage of the sales known as a royalty payment
Average cost of a franchisee is £250,000 (this does depend on the type of franchise)
ADVANTAGES FOR THE FRANCHISEE
1. The franchisor should select people from those who want to buy a franchise. This tends to eliminate people who are unsuitable for the business
2. The franchisor sets out at the start how much money the franchisee needs to put into the business. Many business fail because they badly underestimate the amount of money need to survive.
3. The franchise formula has already been tried out and tested to be successful. So the franchise has only to repeat previous success.
DISADVANTAGES FOR THE FRANCHISEE
1. Initial payment can be quite high and may not be affordable. The payments (royalties) can also take some money from the profit.
2. The franchisee can not sell the business without the permission of the franchisor.
3. In some franchises the franchisor can end the franchise arrangement without having to give a reason.
4. Have to pay a percentage of your revenue to the business you have bought the franchiser from.
5. You would probably be told what prices to set, what advertising to use and what type of staff to employ.
Location is very important for the success of most businesses. You make sure you do your market research and choose the location that give you the most access to potential customers.
Franchisee - A business that agrees to manufacture,distribute or provide a branded product, under the license by a franchisor.
Franchisor - The business that gives franchisees the right to sell its product, in return for a fixed sum or a royalty payment.
WHAT DOES THE FRANCHISOR PROVIDE? (BENEFITS)
1. Training to start the business
2. Equipment e.g vehiclse and shop fittings
3. Materials to make the products
4. A brand name with advertising
5. customers through advertising
6. Back up services (possible loans, insurances, call centre etc)
7. Exclusive area (specific area where there is no direct competition with another franchisee)
WHAT DOES THE FRANCHISOR GAIN? (COSTS TO THE FRANCHISEE)
A lump sum of money from the newcomer when they set up
A percentage of the sales known as a royalty payment
Average cost of a franchisee is £250,000 (this does depend on the type of franchise)
ADVANTAGES FOR THE FRANCHISEE
1. The franchisor should select people from those who want to buy a franchise. This tends to eliminate people who are unsuitable for the business
2. The franchisor sets out at the start how much money the franchisee needs to put into the business. Many business fail because they badly underestimate the amount of money need to survive.
3. The franchise formula has already been tried out and tested to be successful. So the franchise has only to repeat previous success.
DISADVANTAGES FOR THE FRANCHISEE
1. Initial payment can be quite high and may not be affordable. The payments (royalties) can also take some money from the profit.
2. The franchisee can not sell the business without the permission of the franchisor.
3. In some franchises the franchisor can end the franchise arrangement without having to give a reason.
4. Have to pay a percentage of your revenue to the business you have bought the franchiser from.
5. You would probably be told what prices to set, what advertising to use and what type of staff to employ.
Location is very important for the success of most businesses. You make sure you do your market research and choose the location that give you the most access to potential customers.