Does the franchisee control the quality of a franchise?
While it is true the franchisee controls day-to-day operations, the strongest franchise systems are still able to maintain the highest levels of quality control. In fact, with strong quality controls in place, franchised locations very frequently outperform company-owned and hired manager-run locations.
Can a franchisor exercise too much control over a business?
While franchisors need to be careful not to exercise too much control (because of agency, joint employment and other concerns), the franchisor should exercise strong quality controls over any aspect of the business that will impact the consumer’s perception of the concept or brand standards.
What are the expenses of a franchisee?
Besides the up-front money required of a franchisee, Stuart will have to pay building costs and purchase inventory and equipment. This type of expense is called: investment costs. royalty payments.
Why has the franchisor attempted to make changes to the contract?
Recently the franchisor has attempted to make changes to the contract that would increase Martin's costs so as to make the business unprofitable. The franchisor is engaging in: a. master licensing. b. encroachment. c. due diligence. d. churning. Edmond is negotiating to purchase an existing business.
Who wants to sell a franchise?
What are the disadvantages of franchising?
What is Caron's contract with Devon?
What is the deal between Leonard and the seller?
What is Jeffrey's job?
What does McDonald's do?
How often does Tomas have to report gross sales?
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About this website
Who wants to sell a franchise?
the franchisor wants to sell the franchise to someone else.
What are the disadvantages of franchising?
A disadvantage of franchising is. restricted sales territories. RST, Inc., a franchisor, is requiring its franchisee, Raymond, to make significant changes to the equipment and interior appearance of his business as a condition of renewing the contract.
What is Caron's contract with Devon?
Terms in this set (65) Caron signed a contract with Devon allowing her to provide services using Devon's trademark, logo, and business model. This business is: a franchise. Edward signed a contract allowing Francine to sell products using his brand name so long as the product meets Edward's quality standards.
What is the deal between Leonard and the seller?
Leonard and the seller have agreed to a price for a business. Leonard cannot pay cash for the entire purchase price so he applied for a bank loan. The bank is likely to: require the assets of the company serve as collateral for the loan. Marvin is selling his business as a total entity.
What is Jeffrey's job?
Jeffrey's job is to identify potential business people in his country who might want to do business using a particular brand name. When the contract is signed, Jeffrey then provides training to the business person. Jeffrey is most likely:
What does McDonald's do?
McDonald's corporation helps select the location for a new restaurant and provides financial assistance, training, marketing, and products. McDonald's engages in:
How often does Tomas have to report gross sales?
Each month Tomas must report his gross sales and pay a percentage of that amount to his franchisor. This percentage is:
What was Jeff Bezos' original business plan?
Jeff Bezos' original business plan involved taking orders for books and having the items shipped directly from the publisher to the customer. He modified the plan to include other products such as toys and decided to buy the toys from the producers and ship them from his own warehouse. This modification of the original plan is called:
What happens when a Fortune 500 company lays off workers?
When a Fortune 500 business lays off workers, some displaced employees may decide to start their own businesses. They are best described as
What does integrity give a company?
a. The entrepreneur with integrity gives the company a competitive edge.
Why did Walter leave the corporation?
Walter wanted to be able to make decisions about issues that directly affected his department but in his corporation, the managers made all the decisions. So Walter left the corporation and started his own firm. Walter was looking for:
Who is the owner of DEF LLC?
Clark, the owner of DEF LLC, bragged about hiding company income from the IRS but was surprised when he learned his sales manager was accepting kickbacks from customers. Clark should have remembered:
Did Geraldo go fishing?
Geraldo often would rather go fishing than work his business. Geraldo lacks:
Why should franchisors exercise quality controls?
While franchisors need to be careful not to exercise too much control (because of agency, joint employment and other concerns), the franchisor should exercise strong quality controls over any aspect of the business that will impact the consumer’s perception of the concept or brand standards.
What are the measures of franchise quality control?
The broader outlines of franchise quality control measures will come from the franchise legal documents (trademark use, training requirements, territory and product mix, approved and designated suppliers, and similar matters). It is vitally important that franchisors use legal counsel experienced in franchising to draft the Franchise Agreement and Franchise Disclosure Document to ensure the documents protect the franchisor’s best interests and reflect current best practices. For their part, franchisors need to be vigilant in enforcing the standards outlined in the legal documents. If one franchisee is allowed to circumvent the rules, others could soon follow, and quality for the whole system could be in jeopardy.
How do franchisors maintain their brand?
Franchisors maintain the quality of their brand by making sure their franchisees are properly trained to run the franchise and by providing ongoing support. Franchisees need to be supported at every stage of their franchise ownership experience. The type of support, of course, will vary with the brand and the franchisee. Even industry-experienced candidates need to be trained to maintain the quality standards of your brand. For most systems, the right training mix involves independent study, some classroom (including online classroom) components, and significant hands-on training. It is valuable, as well, for members of the franchisor’s team to assist with store openings and business launches. Most franchisors provide some level of ongoing field support as well, covering important topics such as finances, marketing, ongoing operations, facility maintenance, and more. All of these training and support components set the tone for the franchisor-franchisee relationship and can help make “quality control” feel not so controlling.
What happens if a franchisee circumvents the rules?
If one franchisee is allowed to circumvent the rules, others could soon follow, and quality for the whole system could be in jeopardy.
Is it true that a franchisee controls day to day operations?
While it is true the franchisee controls day-to-day operations, the strongest franchise systems are still able to maintain the highest levels of quality control. In fact, with strong quality controls in place, franchised locations very frequently outperform company-owned and hired manager-run locations.
Do franchises have quality control?
While it is true the franchisee controls day-to-day operations, the strongest franchise systems are still able to maintain the highest levels of quality control. In fact, with strong quality controls in place, franchised locations very frequently outperform company-owned and hired manager-run locations. While franchisors need to be careful not ...
What is product and trade name franchising?
When engaged in “product and trade name franchising” the business mainly gets to use the well known name of the franchisor’s product or service and the operation of the company is left up to the franchisee.
What is a master licensee?
master licensee is a firm or individual that acts as a sales agent (or middleman), taking on the contractual responsibility of finding new franchisees within a specified territory. Sometimes a master licensee will provide support services, such as training and warehousing, which are more traditionally provided by the franchisor.
Who wants to sell a franchise?
the franchisor wants to sell the franchise to someone else.
What are the disadvantages of franchising?
A disadvantage of franchising is. restricted sales territories. RST, Inc., a franchisor, is requiring its franchisee, Raymond, to make significant changes to the equipment and interior appearance of his business as a condition of renewing the contract.
What is Caron's contract with Devon?
Terms in this set (65) Caron signed a contract with Devon allowing her to provide services using Devon's trademark, logo, and business model. This business is: a franchise. Edward signed a contract allowing Francine to sell products using his brand name so long as the product meets Edward's quality standards.
What is the deal between Leonard and the seller?
Leonard and the seller have agreed to a price for a business. Leonard cannot pay cash for the entire purchase price so he applied for a bank loan. The bank is likely to: require the assets of the company serve as collateral for the loan. Marvin is selling his business as a total entity.
What is Jeffrey's job?
Jeffrey's job is to identify potential business people in his country who might want to do business using a particular brand name. When the contract is signed, Jeffrey then provides training to the business person. Jeffrey is most likely:
What does McDonald's do?
McDonald's corporation helps select the location for a new restaurant and provides financial assistance, training, marketing, and products. McDonald's engages in:
How often does Tomas have to report gross sales?
Each month Tomas must report his gross sales and pay a percentage of that amount to his franchisor. This percentage is:
Introduction
- Subway: start-up costs $84,300–$258,300; 41,916 locations worldwide in 2015
- McDonald's: start-up costs in 2010: $995,900–$1,842,700; 36,368 Locations in 2015
- 7-Eleven Inc.: start-up costs in 2010: $40,500–$775,300; 56,439 locations in 2015
- Hampton Inns & Suites: start-up costs in 2010: $3,716,000–$15,148,800
Buying A Franchise
- Be a Detective.In addition to the routine investigation that should be conducted prior to any business purchase, you should be able to contact other franchisees before deciding to invest. You can o...
- Know What You Are Getting Into.Before entering into any contract as a franchisee, you should make sure that you would have the right to use the franchise name and trademark, receive tr…
- Be a Detective.In addition to the routine investigation that should be conducted prior to any business purchase, you should be able to contact other franchisees before deciding to invest. You can o...
- Know What You Are Getting Into.Before entering into any contract as a franchisee, you should make sure that you would have the right to use the franchise name and trademark, receive training and ma...
- Watch Out for Possible Pitfalls.The contract between the two parties usually benefits the franchisor far more than the franchisee. The franchisee is generally subject to meeting sales quotas and is...
- Seek Professional Help.The tax rules surrounding franchises are often complex, and an attor…
Advantages For The Franchisor
- Access to Capital for Growth and Expansion. After the brand and formula are carefully designed and properly executed, franchisors are able to sell franchises and expand rapidly across countries and...
- Cash Flow for Operations. In addition to initial franchise fees that can range from $50,000 to $5 million, franchisors receive payments in the form of royalties from each franchisee. Thes…
- Access to Capital for Growth and Expansion. After the brand and formula are carefully designed and properly executed, franchisors are able to sell franchises and expand rapidly across countries and...
- Cash Flow for Operations. In addition to initial franchise fees that can range from $50,000 to $5 million, franchisors receive payments in the form of royalties from each franchisee. These royaltie...
- Economies of Scale. Once a franchise is established with multiple locations, the company may be able to leverage its buying power to realize economies of scale with suppliers, advertisers, and vend...
Disadvantages For The Franchisor
- Lack of Control.Despite the language of the franchise agreement, once the franchisee has established their location, the franchisor may have difficulty ensuring that quality standards are met and t...
- Trade Secrets.If the success of a business is based on a trade secret, special process, or innovative technology, establishing a franchise may make the business vulnerable to knock-o…
- Lack of Control.Despite the language of the franchise agreement, once the franchisee has established their location, the franchisor may have difficulty ensuring that quality standards are met and t...
- Trade Secrets.If the success of a business is based on a trade secret, special process, or innovative technology, establishing a franchise may make the business vulnerable to knock-offs or imitatio...
- Overexposure, Brand Dilution. One or two locations of a business is unique and may generate enough demand that the business can charge top dollar for goods or services. When franchises appear on al...
Advantages For The Franchisee
- Less Risk. In certain industries, when compared with starting one's own business from scratch, buying a franchise enables the franchisee to own a business with a proven track record and an establis...
- Name/Brand Recognition. The franchise has an established image and identity already, which can reduce or simplify marketing efforts. Many franchises are nationally advertised brands, s…
- Less Risk. In certain industries, when compared with starting one's own business from scratch, buying a franchise enables the franchisee to own a business with a proven track record and an establis...
- Name/Brand Recognition. The franchise has an established image and identity already, which can reduce or simplify marketing efforts. Many franchises are nationally advertised brands, shortening the...
- Access to Expertise, Ongoing Support. Franchisee often receives help with site selection, training materials, product supply, and marketing plans. The franchisee gets to take advantage of a busines...
- Relative Autonomy. Franchisee must comply with the terms and standards of the franchisor, …
Disadvantages For The Franchisee
- Cost. Buying and running a franchise can be very expensive. Jimmy John's Subs was listed as one of the top franchises in 2016, but the initial investment to open a location was $325,000–$555,000. F...
- Unequal Partnership. The franchisor sets the rules, and the franchisee must follow them. The franchisee doesn't have much leverage if the franchisor falls short on promises or makes unr…
- Cost. Buying and running a franchise can be very expensive. Jimmy John's Subs was listed as one of the top franchises in 2016, but the initial investment to open a location was $325,000–$555,000. F...
- Unequal Partnership. The franchisor sets the rules, and the franchisee must follow them. The franchisee doesn't have much leverage if the franchisor falls short on promises or makes unreasonable de...
- Rules and Enforcement. Franchisor rules imposed by the franchising authority are becoming increasingly strict. Some franchisors are using minor rule violations to terminate contracts and seize the...
Legal Documentation
Franchisee Selection
- There is almost nothing that impacts the success of a franchise system as much as franchisee selection. While lead generation is important, it is only the first step in a long journey. Remember, successful franchise systems depend on successful franchisees. Franchisors are not doing themselves or the franchisee any favors by failing to thoroughly vet a candidate before awardin…
Documented Systems
- The franchisor’s systems need to be documented in detail to give franchisees a roadmap for success. Access to these documented systems is why many would choose to buy a franchise rather than going it alone. In franchising, systems are documented through a confidential franchise operations manual which incorporates information essential to the initial and ongoing …
Training and Support
- Franchisors maintain the quality of their brand by making sure their franchisees are properly trained to run the franchise and by providing ongoing support. Franchisees need to be supported at every stage of their franchise ownership experience. The type of support, of course, will vary with the brand and the franchisee. Even industry-experienced candidates need to be trained to m…