UNIVERSITY OF PROFESSIONAL STUDIES,
ACCRA
GROUP 18
PROGRAMME: BSC. ACCOUNTING
COURSE: ENTREPRENEURIAL DEVELOPMENT
NAMES
INDEX
BALAMEY JEROME
12BAR0057
DZAH ELLIOT
12BAR0145
OWURA A. SARPONG
12BAR0055
FRANCIS ADAMS
12BAR0041
THEOPHILUS GUMENU
12BAR0012
JEFFREY ANDY OKINE
12BAR0024
BAGBARA JOSHUA
12BAR0137
KOKROKO PROSPER LOVE
12BAR0127
GEORGE OKRAKU
12BAR0050
KUEBUTORNYE WISDOM
12BAR0109
PRINCE TORNU
12BAR0070
WHAT IS FRANCHISING
Franchising is simply a method for expanding a business and distributing goods and services
through a licensing licensing relationship. In franchising, franchisors (a person or company that
grants license to a third party for the conducting of a business under their marks) not only specify
the products and services that will be offered by the franchisees (a person or company who is
granted the licenses to do business under the trademark and trade name by the franchisor), but
also provide them with an operating system, brand and support. Brief separate glossary of the
franchise agreement is legal document that governs the franchisee/franchisor relationship. There
is no standard format for a franchise agreement because the terms and conditions and operations
vary from franchise to franchise and industry to industry. In general, franchise agreement cover
the following main provisions:

Training and ongoing support provided by the franchisor. Each franchisor has its
own training program for franchisees and their staff, which can include training done at
the franchisee’s location or at the corporate headquarters or a combination. Most
franchisors offer ongoing support including administrative and technical support

Assigned territory. Your franchise agreement will designate the territory in which you
will operate and whether or not you have exclusive rights.

Duration of the franchise agreement. This provision states the length of the agreement

Franchise fee and total anticipated investment. Franchisees are required to pay an
initial franchise fee that grants them the right to use the franchisors trademark and
operating system

Trademark, patent, and signage use. This provision covers how a franchisee can use
the franchisor’s trademark, patent and signage

Royalties and other fees you expected to pay. Most franchisors require franchisees to
pay an ongoing royalty, usually a percentage of total sales, typically on a monthly basis

Advertising. The franchisor will reveal its advertising commitment and what fee
franchisee are require to pay towards those cost

Operating protocol. This section details how franchisees run their outlets
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
Renewal right and franchisee termination policies. This provision deal with how the
franchise can be renewed or terminated. Some franchisors have an arbitration clause in
the franchise

Resale rights. Some franchisors allow franchisees to sell their franchises for whatever
reason. Many however, write in buy back or right to first refusal clauses, which allow the
franchisor to buy back the franchise at a rate determined by them or to match any
potential buyer’s offer who has expressed interest in buying your franchise
COMMON FRANCHISE TERMS
1. Business format franchises: this type of franchise includes not only a product, service
and trademark but also the complete method to conduct the business itself. Such as the
marketing plan and operation manuals.
2. Disclosure statement: also known as
the FDD, or franchise disclosure document,
provides information about the franchisor and franchise system
3. FDD: The franchise disclosure document which provides information about the
franchisor and franchise system to the franchisee.
4. Franchise: a license that describes the relationship between the franchisor and franchisee
including use of trademarks, fees, support and control.
5. Franchise agreement: the legal written contract between the franchisor and franchisee
which tells each party what each is supposed to do
6. Franchisee: the person or company that gets the right from the franchisor to do business
under the franchisor’s trademark or trade name
7. Franchising: a method of business expansion characterized by a trademark license,
payment of fees, and significant assistance and/ or control
8. Franchisor: The person or company that grants the franchisee the right to do business
under their trademark or trade name
9. Product distribution franchisee: A franchise where the franchisee simply sells the
franchisor’s products without using the franchisor’s method of conducting business
10. Royalty: The regular payment made by the franchisee to the franchisor, usually based on
a percentage of the franchisee’s gross sales
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11. Trademark: The marks, brand name and logo that identify a franchisor which is licensed
to the franchisee
TYPES OF FRANCHISING
There are three basic types of franchise: trade name franchise, product distribution franchise
and pure franchise.
1. Trade name franchise: involves a brand name such as True Value Hardware or Western
Auto. , the franchisee purchases the right to become identified with the franchiser trade
name without distributing particular products exclusively under the manufacturer name
2. A product distribution franchise: licenses the franchisee to sell specific product under
manufacturer’s band name and trademark through a selective, limited distribution
network. This system is commonly used to market automobiles, (Chevrolet, Oldsmobile,
Chrysler) these two distribution systems allow franchisees to acquire some of the patent
company’s identity. Franchisees concentrates on the franchisers product line, although
not necessarily on the exclusively. Since 1972, the number of product and trade name
franchise has decline rapidly because of intense competition and general economic
conditions. But the sales of these two franchise systems have climbed steadily since
1972.
3. A pure ( or comprehensive or business format ) franchise: provides the franchisee
with a complete business format, including a license for a trade name , the product or
service to be sold, the physical plant , the method of operation , a marketing strategy
plan, a quality control process a two day communications system and the necessary
business services. That is the franchisee purchase is the right to use all the element of a
fully integrated business operation. A pure franchise is the most rapidly growing of all
types of franchise and is common among fast food restaurants, lodging establishment,
business service firms car rentals agencies, educational institutions, beauty aid retailers,
and other promising growth industries
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BENEFITS OF FRANCHISING
A. Franchising requires less capital than other growth methods: Franchising permits
your company to grow with capital invested by individuals franchise owners. For the
majority of Fran source clients, the investment required to franchise their business is
recouped through the sale of the first two to three franchises.
B. Rapid expansion: in today’s market place, the window of opportunity for new or
unique business concept closes very quickly. Franchising permits multiple units to be
opened simultaneously gaining a foothold over be competitors.
C. Market dominance: Multiple location increase the company’s competitive
advantage over similar business.
D. Franchising puts the business owner in charge: Once again, this is due to the fact
that a highly motivated owner is running the business rather than an employee. With
their capital at risk, franchising are much more motivated then employees to perform
at their highest levels.
E. Greater buying power: Franchisors that purchase product and services for their
franchise network can often negotiate volume discounts from vendors and suppliers.
Sharing a portion of saving with franchisees provide higher operation margin and a
competitive advantage over other similar business.
F. Increased name recognition: As additional locations are opened, names recognition
increases. In the United States, customer loyalty towards recognized brand is at an
all-time high. Customer typically feel more secure frequenting a business person, it
has become difficult to compete against companies that have significant resources to
develop and promote their brand .Franchising permits an individual to benefits from
the collective power and growth of the franchise network, Which in turn leads to
greater name recognition and competitive advantages for each individual franchisee.
G. Increase advertising and marketing budgets: Franchising may be required to
contribute a percentage of their gross sales to an advertising fund administered by the
franchisor. This enables the franchisor to advertise in regional and/or national media
for the benefit of the franchise network.
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DRAWBACK OF FRANCHISING
A. Unsatisfied Training Programs: Every would-be franchisee must be wary of the
unscrupulous franchiser who promises extensive services, advice and assistance but
delivers nothing. for example, one owner relied on the franchiser to provide what has
been describe as an extensive , rigorous training program after paying a handsome
technical assistance fee. The program was nothing but a set of pamphlets and do it your
self-study guide
B. Less freedom: when a franchisee signs a contract, he agrees to sell the franchisors
product or services by following it prescribe formula.
C. Restriction on purchasing: In the interest of
maintaining quality standards, the
franchisee often required to purchase products or special equipment’s from the franchiser
and perhaps other items from an approved supplier. Under some conditions such
purchased arrangements maybe challenged in court as a violation antitrust law
D. Limited product line: In most cases, the franchise agreement stipulates that, the
franchise can sell only those product approved by the franchiser. Unless willing to risk
cancellation of his license, the franchisee must avoid selling any unapproved product
through the franchise
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