BCEN 2900 ENTREPRENEURSHIP Chapter 6 Franchising

Franchises  One firm already has a successful product or service  Offers its trademarks and patented business processes to another for…  Initial franchise fee and  Ongoing royalties

Growth in Franchise Impact Source: McGrow Consulting,

Entrepreneurs  Franchisees can be entrepreneurs  The ones opening the franchise in their local market  Franchisors can be entrepreneurs  Different role of being a manager of managers  EmbroidMe Franchise Video EmbroidMe Franchise Video

Three Types of Franchises  Trademark franchise  Franchisee can buy right to use trademarked business name – does not have to buy product from parent  Distribution Franchise  Use the trade name, sell the parents’ products exclusively  GM and Ford dealerships  Business Format Franchise  Formula for doing business  Training, support, advertising

Franchise Agreements  Single unit agreements  Open one store  Area agreements  Open several stores in one area, up to a maximum  Master franchisee: Can also sell franchises to others in that area

How to Get Started - Franchisor  Develop a business plan for the franchises.  Consult an attorney or consultant that specializes in franchising  Prepare your policies, advertising, strategy, and management  Start to recruit and help franchisees!

Developing a Franchise  Franchise fee ($25,000-$100,000)  Capital Requirements  Land  Building  Inventory  Licenses  Royalty payment on gross income  Advertising fees (on top of your ads)  Other fees as agreed upon

How to Get Started - Franchisee  Decide on a good franchise opportunityopportunity  Visit several outlets across its territory and talk  Visit an attorney  Check the franchise’s references  Uniform Franchise Offering Circular Uniform Franchise Offering Circular  Sign agreement and begin training  Start your business!

Pros and Cons of Franchising  Pros  Training provided  Brand name recognition  Quality control  Proven business models  Site selection help  Cons  Fees for franchise  Required startup capital  Restrictions on management methods  Purchasing requirements

Rules and Regulations  FDD (Franchise disclosure document) must be offered to potential franchisees to review  Dunkin Donuts FDD Dunkin Donuts FDD  Franchise agreements and documents must be attached to the circular as well  State laws for franchising apply as well  Beyond regulation: the ethics problems

Food for Thought  Two People  Person A Creative, spontaneous, thrives on adventure  Person B Disciplined, structured, organized  Which of these would be best suited for a franchise?  Why?