Chapter 15 Lecture Slides Franchisingv2 - CHAPTER Franchising Franchising 15 Franchising Franchising is a form of business organization in which a firm

Chapter 15 Lecture Slides Franchisingv2 - CHAPTER...

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Franchising Franchising CHAPTER 15
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Franchising Franchising is a form of business organization in which a firm that already has a successful product or service (franchisor) licenses its trademark, the right to sell its products an services, and method of doing business to another business or individual (franchisee) in exchange for a franchise fee and an ongoing royalty payment.
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FRANCHISERS
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Types of Franchising Tradename Product distribution Pure (Business format)
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Agency Theory Principal – one who delegates work to another Agent – one who perform the work Agency problem Goal Conflict - desires or goals of the principal conflict with the desires and goals of the agent. Difficult to verify what the agent is actually doing Agency problem is addressed through contracts 6 - 5
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Advantages and Disadvantages of Franchising as a Method of Business Expansion Advantages Disadvantages Rapid, low-cost market expansion. Income from franchise fees and royalties. Franchisee motivation. Access to ideas and suggestions. Cost savings. Increased buying power. Profit sharing. Loss of control. Friction with franchisees. Managing growth. Differences in required business skills. Legal expenses.
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Is a Business Ready to Franchise?
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  • Spring '14
  • DavidL.Dahl
  • franchisees

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