Chapter Six
Franchising
1

History and Background of
Franchising
2

 Manufacturer Directed Franchise
 Wholesaler-Retailer-Directed Franchise
 Franchising Company
3

Advantages of Franchising
 Proven Market fort he Product or Service
 Services the Franchisor may provide.
– 1. Selection of Location
– 2. Purchase or Construction of Site, Buildings, and Equipment
– 3. Provision of Financing
4

Advantages of Franchising

Services ….
– 4. Standardized Methods of Operating
– 5. Advertising
– 6. Purchasing Advantages
– 7. Training
5

Potential Disadvantages of
Franchising
 Lack of Independence
 Cost of the Franchise
 Unfulfilled Promises
 Restrictions of the Contract
– Product or Service Offered
– Line Forcing
– Termination
6

Potential Disadvantages of
Franchising
 Saturation of the Market
 Lack of Security
 Cost of Merchandise
 Effectiveness of Promotion
 Exaggeration of Financial Success
7

Evaluation of a Franchise
Opportunity
 Franchisor
 Industry Associations
 Professionals
 Other Franchisees
 Government Agencies
8

The Entrepreneur as Franchisor
 What Businesses can be Franchised?
9

The Entrepreneur as Franchisor
 How does one become a Franchisor?
– 1. Establish a Prototype
– 2. Prepare the necessary Information.
– 3. Investigate the Legal Requirements
– 4. Develop a Planed and Standardized Program of Operations
– 5. Obtain Adequate Financing
10

Franchising in the Future
11

Appendices
 A. A Sampling of Franchises Operating in
Canada
 B. Trade Associations that Assist
Franchisees and Franchisors
 C. A Checklist for the Potential Franchisee;
Questions to Answer before Going into
Franchising
 D. Franchise Contract Clauses
12

 1. Why is franchising enjoying such rapid growth in the Canadian economy?
 2. What are the three general categories of franchises?
 3. What are the potential advantages of franchising?
13

 4. What are the potential disadvantages of franchising?
 5. When investigating purchasing a franchise what sources of information are available to assist in making the decision?
 6. What steps are involved in becoming a successful franchisor?
14