Franchising is the practice of using the business model of another person. Franchising is a word of Anglo-French derivation – of Franc-is used both as a noun or a verb (transitive). A franchise is an agreement between the franchiser and the recipient “franchise.” There are two important elements that payments are made to a franchisee – the brand, which distinguishes the franchiser, and the training of franchisees. The franchiser receives a royalty for the trademark and a rate of training and advice. The relief is usually for a specified period and given a “territory.” It may be an exclusive or nonexclusive franchise. A number of tangible and intangible, such as support services to national or international advertising, training, and are commonly available by the franchiser.
The agreements typically last from five to thirty years, with the cancellation or early termination of the majority of contracts, with serious consequences for franchisees. The franchise has existed for many centuries, but failed to fame until the 1930s in the United States where the establishment of electricity, vehicles, and in the 1950s, the interstate highway system helped boost modern franchising, especially franchise-based food service establishments. According to the International Franchise Association around 4% of all U.S. businesses are franchises. WHAT ARE THE ADVANTAGES OF THE FRANCHISE? According to the Small Business Administration of the United States, the franchise has several advantages over independent retailers. They are: Reputation: a licensing system established and well known, the new licensee does not have to work to establish the reputation of the firm. The product or service being offered and accepted by the public.
Working capital: it costs less money to operate a concession business, because the franchiser gives good dealer inventory controls and other means to reduce costs. When necessary, The franchiser may also provide financial assistance for operating expenses. Experience: the advice given by the franchiser offset the inexperience of the new owner. Management assistance: The owner of a small independent store has to learn everything, and a retailer may not be an experienced teacher in all aspects of finance, statistics, marketing and sales promotion. The best franchise companies give the dealer continued assistance in these areas. Utilities: to take reasonable costs of franchise and supply agreements, the dealer usually can expect a reasonable profit margin, because the business is managed with the efficiency of a chain. Motivation: Because the dealer and the franchiser profit from the success of the operation, to achieve both work properly.