Concetti Chiave
- Franchising enables businesses to expand internationally by allowing franchisees to trade under the company's brand and logo.
- Franchisees pay an initial investment and ongoing fees, while franchisers provide support in training, advertising, and management services.
- Companies like Coca-Cola, McDonald's, and Benetton have successfully expanded globally through franchising.
- The British Franchise Association (BFA) was established in 1977 and now oversees 600 franchises in the UK.
- Franchises have a 94% profitability rate after five years, making franchising a safer business option compared to starting independently.
Franchising has developed in recent years as an effective way of expanding a business, especially in a foreign country. A franchise is an agreement by which a company (the franchiser) allows other enterprises (the franchisees i.e. people who have bought the franchise) to trade goods and services using its brand name and company logo in a given area.
Franchising Operation
Naturally the franchisee pays for this privilege, usually by an initial investment and subsequent royalties or fees. In return, the franchiser has an obligation to support the franchise network, notably with training, advertising, promotional activities and with a specialist range of management services. The franchisee is legally an independent enterprise but is expected to conform to the conditions of the franchise in term of image, promotion and quality standards.
Successful Examples in Franchising
Coca-cola, McDonald's, Wimpy, Benetton and other large companies have made theur name all over the world through franchising operations.
In 1977, eight firms, including the famous fast-food chain Wimpy, launched the British Franchise Association (BFA). There are currently 600 business franchises in the UK comprised of about 30,000 franchises.
Franchises have a higher success rate than sole traders in starting a business from scratch, because franchising reduces the risk of business failure and the franchisee is supported by the successful business record of the franchiser.
According to the BFA, 94% of franchises were still in profit after five years, compared with only 45% of other independent small firm. Franchising is, therefore, often sees as a “safer option” than complete independence.
Domande da interrogazione
- What are the financial obligations of a franchisee in a franchising agreement?
- How does franchising benefit the franchisee compared to starting a business independently?
- What role does the British Franchise Association (BFA) play in the UK franchising industry?
A franchisee typically pays an initial investment and subsequent royalties or fees for the privilege of using the franchiser's brand name and logo, as outlined in the text.
Franchising offers a higher success rate and reduces the risk of business failure, as franchisees benefit from the franchiser's successful business record and support, making it a "safer option" than complete independence.
The BFA, established in 1977 by firms including Wimpy, supports the franchising industry in the UK, where there are currently 600 business franchises and about 30,000 franchises, contributing to the industry's high success rate.
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