ENTfinal exam

ENTfinal exam - -Franchising-It is a form of business...

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-Franchising-“It is a form of business organization in which a firm that already has a successful product or service (franchisor or parent company) licenses its trademark and method of doing businesses to other businesses (franchisees) in exchange for an initial franchise fee and an ongoing royalty”. -Franchisor: “The party in a franchise contract that specifies the methods to be followed and the terms to be met by the other party”. -Franchisee: “An entrepreneur whose power is limited by a contractual relationship with a franchisor”. Franchising is not appropriate in: – new technology (that it is required to be secret). – when technology/method is complex and difficult to replicate. Product and trademark franchise: • The franchisor give the right to buy its product and use its name. –GM has established a network of dealers that sell GM cars and use the GM trademark in their advertising and promotion. •Here the franchisee is normally autonomous. •Rather than obtaining a franchisee fee plus royalties, the franchisor obtained its income through selling its product. Business format franchise: • It is the most popular. • The franchisor provides a formula of doing business along with training, advertising, and other forms of assistance. • The franchisee is not autonomous. Must follow certain standards. • For the franchisor, its income comes in the form of royalties and franchise fees. Forms of franchising agreement •Individual franchise agreement: it is the sale of a single franchise for a specific location. •Area franchise agreement: Allows a franchisee to own and operate a specific number of outlets in a particular geographic area. •Master franchise agreement: Similar to an area franchise agreement but in addition to the franchisee has the right to offer and sell the franchise to other people in its area. –Advantages: •Capture economies of scale.
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•Reduce administrative overheads per unit of sale. –Disadvantages:
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ENTfinal exam - -Franchising-It is a form of business...

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