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Franchise

Franchise. 4W Derek Sham (33) Francesco Tse (39). Definition. The franchisor giving certain rights to the franchisee within a certain period of time A business method that involves the licensing of trademarks and methods of doing business Usually chain stores. Steps to Establish.

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Franchise

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  1. Franchise 4W Derek Sham (33) Francesco Tse (39)

  2. Definition • The franchisor giving certain rights to the franchisee within a certain period of time • A business method that involves the licensing of trademarks and methods of doing business • Usually chain stores

  3. Steps to Establish

  4. Responsibilities • Franchisor: • Plan location and decoration of the franchisee’s shop • Provide training • Give continuous guidance and assistance to franchisee • Franchisee: • Pay entrance fees • Pay certain percentage of sales revenue as franchisee fees

  5. Examples in HK • 7-Eleven • Starbucks • KFC • Burger King • Pizza Hut • GONG CHA • Happy Lemon

  6. Example :7-Eleven Convenient Stores • Entrance Fee: 450,000 – 550,000 • Include a returnable stock deposit of 200,000 • Operating period given: 5 years • Venue: Franchisee can select from the existing 7-11stores, except the newly opened stores • Rent: pay by franchisor • Franchisee need to attend a 60-days training course (for free)

  7. Example :GONG CHA (貢茶) • Entrance Fee: • Returnable stock deposit : $30,000 • Purchase of Equipment : $120,000 ~ $130,000 • Decoration Fee : $150,000 ~ $200,000 • FEHD License Fee : $20,000 • Stock Purchase : $120,000 ~ 150,000 • Operating period given: 3 years • From the 4th year, contract need to be renewedper 2 years for $40,000 • Consultant • Consultancy fee : $2,000 each time • Commissioner need to come at least 1 time/month during the first six months

  8. Example :Starbucks, KFC, Burger King, Pizza Hut • Franchise to one company ONLY • Starbucks  Maxim’s • KFC (HK)  Birdland (Hong Kong) Limited • Burger King  SSPHK (Airport and The Peak) •  NAS Holdings (Others) • Pizza Hut  Jardines Group • This kind of franchisees can franchise to others

  9. Advantages (Franchisor) • Expand regionally, nationally and internationally • No need to take care of daily operations of the branches • Can concentrate on the development of the whole business • Franchisee can find out new areas of business • Earn the entrance fees and regular franchisee fees • Block the chance of loss

  10. Advantages (Franchisee) • No need to spend long period of time to build the company’s reputation • Burden is less than independently setting up a new business • Obtains support from the head office • Can learn the way to run a business • Ensure there is not other competing franchise business around

  11. Disadvantages (Franchisor) • Franchisee can become a competitor • Franchisee may hurt the reputation of the head office

  12. Disadvantages (Franchisee) • Have to follow the requirements of the franchisor • Lack of self determination or scope of creativity • The franchisee cannot take all the profits • Have to pay a certain percentage of sales revenue as franchise fees

  13. Sources • Textbook • Wikipedia (English / Simple English) • en.wikipedia.org / simple.wikipedia.org • 7-11 • http://www.7-eleven.com.hk • GONG CHA • http://www.gong-cha.com • Online Forum • http://forum.online.hk/viewthread.php?tid=966&extra=page%3D1&ordertype=1

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