FRANCHISING: AN EMERGING
GLOBAL TRENDS
Teacher – Shahed Rahman
FRANCHISING SYSTEM

Franchising is a vertical
marketing system in which
one firm ( The franchisor)
provide another individual
or firm ( the franchisee), for
consideration, a license
privilege to do business in a
specified geographic area,
along with assistance in
organizing training,
merchandising, and
managment
CONSIST OF THREE RELATIONSHIPS

Legal Relationship



The contract between the franchisor or franchisee
The responsibilities and obligation
Business Relationship
Day to day activities necessary to provide acceptable
products and service to customers
 Franchisee operates the business under the
franchisor’s trade name or marketing plan


Nonbusiness Relationship
Forward looking, cooperative association that exist
between two independent channel members
 Success is tied directly to the success of other
 Interrelated intrinsically to one another

FRANCHISING SYSTEM
Franchising Systems consist of network of
franchisors and franchisees
 With in this system franchisees receives the
training, guidance, preparations necessary to use
trade secrets, operational procedures.

BENEFITS OF FRANCHISING
Developing the business with less cost
 Independent owner
 Rapid market penetration
 Franchisors do not need to motivate franchisee –
as they are the owner of the company
 Franchisees get an extensive support from
franchisors.
 Proven product o service concept
 Recognizable brands
 Standardized methods for operations

TYPES OF FRANCHISING

Tied-house Franchising Systems



Product/Trade name Franchising




First generation franchising
German brewers in the 18th century contracted with
tavern to sell their brand of beer exclusively
Second generation appeared during the 19th century
Singer sewing machine company elected the sales
people to sales its product
Distribute a product under franchisor’s trademark
Business Format Franchising
20 th Century by A&W
 Replicate a complete business concept including
product or service.

CONCERN OF FRANCHISEES
Franchising not always confirm profit
 When contract is over the franchisor can pass to
another entrepreneur.
 Open another store or franchise near your store
 Independence level
 Some franchisor just do it for market entry
 Franchisor collect promotional money from
franchisees

CONCERNS OF FRANCHISORS
Franchisees who decides to buy supplies or
equipments from independent sources.
 Effect franchisors profitability
 Royalty fees to franchisors
 Reporting their gross sales honestly
 Franchisees can hide some of the incident what is
bad for the company.
 Not following the marketing strategies.

RELEVANT TRENDS IN FRANCHISING
ENVIRONMENT
Social, Cultural and Demographic Trends
 Economic Trends
 International Trends
 Industry Trends

INTERNAL ENVIRONMENTAL FACTORS

Conflicts in Franchising
Upfront Fees
 Tying agreements
 Capricious Termination


Lack of security since franchisors can terminate agreements
or fail to renew them at the end of pre specified period
 Expiration of the term of the contract
 Franchisee bankruptcy
 Some default in franchisee’s performance
Encroachment
 Lack of Cooperation

PROTECT YOURSELF BY ….
Self Evaluation
 Investing the franchise
 Studying the disclosure document
 Checking out the disclosure
 Questioning earning claims
 Obtaining professional advice
 Knowing your legal rights

CURRENT LEGAL STANDARDS IN
FRANCHISING

Disclosure

FTC Rule 436
Mandatory Purchases from the
Franchisor
 Termination and Renewal
 Advertising and Promotions
 Percentage you have to pay for
promotion
 Expansion


Franchisor constantly think of expanding
into the market that is already being
served
MAKING FRANCHISE RELATIONSHIP WORK

Strategic Franchise
Partnerships
Mutual responsibility
 Communicating up and down
 Franchisees as customers
 Leadership and attitude

Creating a climate for open
communication
 Commitment to mutual goals
 Achieve those goals require
leadership
