Chapter 9 Franchise Business - FRANCHISING BUSINESS CHAPTER...

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FRANCHISING BUSINESS CHAPTER 9
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Understand the definition of Franchise History & development of Franchise in US & Malaysia Some important elements in Franchise Act 1998. Types of Franchise Advantages and disadvantages of Franchise OBJECTIVES
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The word franchise originated from French word – franco means Freedom Franchise business started in Europe 100 years ago but expanded rapidly in the USA especially in fast-food industry in 1950s. Introduction
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Franchise is used as a strategy to penetrate local & international markets. (McDonald’s, KFC, spread their businesses not only in US but also worldwide 1955 – Ray Kroc started franchising ‘McDonald’s’ by giving his idea to McDonald brothers, Richard & Maurice McDonald in California. 1955 – Harland Saunders started KFC in Kentucky. Franchise History
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Ray Kroc markets McDonald’s by emphasizing the aspects of Quality, Service, Cleanliness & Value (Q,S,C & V). 1961–Kroc established Hamburger University in Illinois as learning & training centre for food franchisees & restaurant managers. (5,000 per year intake in 2005). 1985–there are 250,000 American franchise outlets worldwide (foods, automotives, hotels etc with17% growth annually. In Japan, sales through franchise biz totaled US$150 billion, 7% growth. Franchise History
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Franchise biz in Malaysia started in 1940s through companies like Bata, Singer, Shell & BP. In 1970s & 1980s witnessed a rapid growth in franchising biz when A&W, KFC & McDonald’s spread to Malaysian soil. 1990s franchise system of biz got the attention of the government & many Malaysian entrepreneurs. 1992 – Government established “Franchise Development Programme” to promote franchise biz among Malaysians. Franchise in Malaysia
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Three parties/bodies that actively promote franchise business in Malaysia; 1) Franchise & Vendor Unit at the Ministry of Entrepreneurship & Cooperatives Development. 2) Perbadanan Nasional Berhad (PNS). (MoF) 3) Malaysia Franchise Association (MFA). Together, they conduct training, courses, seminar, exhibitions to expose & encourage entrepreneurs to enter into franchise biz. Franchise in Malaysia
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1998 – the government introduced Franchise Act to monitor & supervise franchise business activities in Malaysia. Section 6 of the Franchise Act 1998 requires that every franchaisor should be registered with the Registrar of Franchise (RoF). Franchise in Malaysia
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As at Nov 2007, there are 321 franchisors registered with the RoF. (116 foreign & 205 local). Industry Category, 29.1% food & beverage, 16.0% apparel & accessories, 12.7% services & maintenance. Franchise in Malaysia
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A form of business that involves the distribution & marketing of products or services through a main company called Franchisor (owner who gives franchise right) and Franchisee (a person who receives franchise right).
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