ENT3173 Chapter 3 - ENT3173 Chapter 3 The Disadvantages of...

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ENT3173 Chapter 3 The Disadvantages of Franchising Goal Conflict o Maximizing sales vs. maximizing profit o Franchisors prefer high-volume, low margin strategies o Franchisees prefer selling lower volumes and higher margins o Disagreements over product mix o Disagreements over coupons and other promotions o They can’t make you honor any ads that they run (example: at participating locations) but if you don’t follow then customers will stop trusting advertisements like that o With gift certificates, people buy it somewhere but you have to honor it at your spot Conflict over outlet concentration Franchisors want lots of outlets. Adding outlets is cheap, maximizes franchise fees and royalties, and builds brand o Franchisees do not want new outlets that will reduce their profits o Some franchisors grant exclusive territories o Concentration a frequent source of litigation Iowa law: no outlet within three miles of existing franchisee o
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  • Spring '15
  • ProfessorBobGarner
  • franchisees

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