lecture%2013.1%20franchising.%20HFT3600 - Lecture 13.1...

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Lecture 13.1 – Franchising Franchising Franchising is a means by which a known business brand may expand its operations by allowing parties to purchase the right to operate its business in a specific location and to abide by the requirements of the franchisor as specified in the franchise agreement. This allows the franchisees to invest capital in the franchise business rather than having the franchisor provide its own capital for expansion of its business. Reputation and Uniformity Franchising is closely tied to copyright and trademark law. The principle involved is that a particular product and/ or service has a valuable reputations which has been established. The franchisor intends to maintain that good reputation by requiring its franchisees to adhere strictly to standards for appearance, quality and service which the consumer expects to be consistent whenever that product and/ or service is used. Franchise Agreement. The franchisor’s means to maintain its image through uniform standards of quality which meet the consumer = s expectations is to specify those standards in the franchise agreement. These standards usually include such things as architecture, paint and decor, advertising, training and standardized products. Franchise agreements are sometime called Licensing Agreements. Legally, the term “franchise agreement” implies greater control by the franchisor as to how the franchisee does its business and that the franchise may be withdrawn for failure to comply with its standards. The License Agreement is more simply a permission to use a trade name, maybe with certain business methods such as a food recipe. The licensee generally has more freedom as to how to carry out its business. Business model franchise There is a more recent form of franchise which is not a bricks and mortar business but a business model which is franchised. Examples of this type of franchise are services from chimney sweeping to cleaning services to professional offices including lawyers and accountants. Franchise brands are deemed to have value because the consumer is already familiar with the brand and business can be attracted with less effort. These types of business model franchises are much less dependent upon uniformity in architecture, decor and even training. They are essentially marketing plans. The meaning of franchising is changing due to this shift in emphasis from copyright and trademarks of a store to protection of a business model. Localization and foreign trade of franchises.
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Franchise brands were traditionally designed to be the same from one location to another. The trend today is for local flavors to influence even franchise brands. This is true for foods, hotels, stores and other franchise businesses. It is more especially true for foreign locations, which benefit from the uniform corporate image but make drastic changes in menus and customer treatment to adapt to local customs. Globalization is causing the meaning of franchising to shift from uniformity of
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This note was uploaded on 03/08/2011 for the course HFT 3600 taught by Professor Boyd during the Spring '11 term at FIU.

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lecture%2013.1%20franchising.%20HFT3600 - Lecture 13.1...

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