142_18_Franchising

142_18_Franchising - FRANCHISING UC Berkeley - Industrial...

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F RANCHISING UC Berkeley - Industrial Organization Martin Li Pei Liang Xiao Han Wai-Ming Chan
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B ASIC D EFINITIONS Agreement or license between two parties Under explicit guidelines at a certain location for a declared period of time. Franchise Distribute its products, techniques, and trademarks Grants for % of sale or royalty fee Franchisor Utilizes Franchisor’s business philosophy Takes advantage of Brand Recognition, Successful Method, Proven Marketing and System Franchisee
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Rank Name 1 Hampton Hotels 2 ampm 3 McDonald’s 4 7-Eleven Inc. 5 Supercuts 6 Days Inn 7 Vanguard Cleaning System 8 Servpro 9 Subway 10 Denny’s Inc.
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Win-Win? Franchiser Franchisee Consumers/ Community
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F RANCHISER Pros Cons Ease of expansion Narrow pool of feasible franchisees Localizes legal issues Limited control of incompetent franchisees Fewer operational costs Legal fees and reputation damage from incompetent franchisees Higher returns Regulation Enter new markets without risking capital Extra fee and manpower on managing groups of franchisees
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F RANCHISEE Pros Cons Proven ideas Maintain standard [Travelodge] Economy of scale Franchisor bankrupts [Roundtable Pizza] Reputation/ Brand name effect Restrictions/ No freedom Network support [7-Eleven] $$$ [7-Eleven]
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P ROS : P ROVEN IDEAS + E CON OF SCALE According to the Small Business Association,
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This note was uploaded on 09/11/2011 for the course EEP 142 taught by Professor Villas-boas during the Spring '11 term at Berkeley.

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142_18_Franchising - FRANCHISING UC Berkeley - Industrial...

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