1. Franchising

2. Today, you will…. Understand the principles of a franchise
Appreciate the advantages and disadvantages of using franchises
Identify a suitable start up location for a franchise

3. The franchisee: the company or person buying the franchise.
Franchises
A franchise is an arrangement in which an established business name is sold to an individual or company, who can then start trading under that name. Many fast food restaurants such as KFC and Pizza Hut operate franchises.
There are two parties involved in a franchise:
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The franchisor: the business selling the right to trade its product or service;
The franchisee: the company or person buying the franchise.

4. Franchisee Rules You must use the franchisor’s suppliers
You must use the franchisor’s equipment
You must follow the franchisor’s rules and regulations
You must give a share of your profit or sales to the franchisor

5. Why would someone set up a franchise and become a franchisee rather than set up under their own name?

6. Why would a company offer people franchises and become a franchisor?

7. Why Franchise? Gets revenue for simply selling their name
Franchisor
Gets revenue for simply selling their name
Gets expansion without having to spend
But…
Risks the franchisee being poor quality and ruining the reputation of the brand
Franchisee
Starts a business with a proven product which should do well. It is less risky than starting a business with an unknown brand
Makes a profit more quickly than a normal new business
But….
The franchisee has to pay the franchisor

8. Benefits of a franchise
Training
Equipment
Materials to use for product/service
Finding customers
Back up services
A brand name

9. The costs Initial start up – average start-up cost is £250,000
Then monthly payments - a percentage of sales
Franchisors may charge high prices for their supplies – this affects profit

10. Advantages & Disadvantages
The franchisor selects people from those who want a franchise. This eliminates people who are unsuitable for the job
Initial investment might be high and payments through the running of the business may mean low profit
Owners underestimate how much money is needed to set up a new business. A franchise has a start-up sum to cover everything
The franchisee cannot sell the business without the permission of the franchisor
The franchisee benefits from the advertising that the franchisor will do
The franchisor can end the franchise arrangement at any point without reason
A franchisor can offer ongoing support to the franchisee
Some franchise businesses are more successful than others

11. What Franchise is this?

13. As you enter the restaurant …
All mobile phones and potential sources of
light go in a security locker

15. Dans le Noir? Business is owned by Ethik Investment Group
One aim is to create awareness about disability in France and they promote the issues affecting people with disabilities
Dans le Noir? gives able-bodied people the chance to experience what it is like to be blind
Many employees of the Ethik and Dan le Noir? are registered blind
Dans le Noir is profitable EVERY year

16. Dans Le Noir? A USP (unique selling point) and franchise:
10-year franchise
Initial fee: £40,000
4% of turnover every year (with a minimum of at least £25,000) expected by the franchisor
Additional charges for recruitment and training

17. Task
If I was thinking of opening a new restaurant, it would be a good idea to choose to be a franchisee for Dans le Noir.

18. Using “treasoning”, write down your arguments for and against the idea
Using “treasoning”, write down your arguments for and against the idea. Then construct your answer.

19. Arguments against the idea
Force:
Force:
Force:
Roots
holding
the idea up
Arguments for the idea
Thick or thin
root?
Thick or thin
root?
Thick or thin
root?

20. Examples Big root Force 7
Restaurant is profitable every year so I should make money from the restaurant
High start-up cost of over £40,000
Big root
Force 7

21. Where would you locate a Subway?
Somewhere busy – more customers
Easy access – good transport links
Good parking facilities