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Franchising Chapter 11. Dowling BA 560 Fall Term 2006. Franchising. An entrepreneurial alliance between two organizations, the franchisor and the franchisee Franchisor – the concept innovator who grows by seeking partners or franchisees to operate the concept in local markets

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franchising chapter 11

FranchisingChapter 11

Dowling

BA 560

Fall Term 2006

franchising
Franchising
  • An entrepreneurial alliance between two organizations, the franchisor and the franchisee
    • Franchisor – the concept innovator who grows by seeking partners or franchisees to operate the concept in local markets
  • A large-scale growth opportunity based on a partnership rather than an individual effort
franchise opportunity recognition
Franchise Opportunity Recognition
  • Primary Target Audience (PTA) identification
  • Service delivery system (SDS) design
  • Training and operational support
  • Field support
  • Marketing, advertising, and promotion
  • Product purchase provision
primary target audience pta
Primary Target Audience (PTA)
  • Three major areas of data collection integral to refining the Primary Target Audience
    • Demographic profiles
    • Psychographic profiles
    • Geographic profiles
demographic profiles
Demographic Profiles

Demographic profiles are a compilation of personal characteristics that enables the company to define the “average” customer

demographic profiles include
Demographic Profiles Include
  • Age
  • Gender
  • Income
  • Home address and Working Address
  • Marital and family status
  • Occupation
  • Race and ethnicity
  • Religion
  • Nationality
psychographic profiles
Psychographic Profiles
  • Social class
    • Upper-upper, lower-upper, upper-middle, middle class, working class, upper-lowers, lower-lowers
  • Lifestyle
    • Health consciousness, fashion orientation
  • Personality variables
    • Self-confident, conservative, independent
geographic profiles
Geographic Profiles
  • Local, regional, national, or international
    • U.S. national market include:
      • Pacific
      • Mountain
      • West North Central
      • West South Central
      • East North Central
      • East South Central
      • South Atlantic
      • Middle Atlantic
      • New England
assessing a franchise
Assessing a Franchise
  • Multiple market presence
  • Outlet pro forma disclosed or discerned
  • Market share
  • National marketing program
  • National purchasing program
  • Margin characteristics
accessing a franchise
Accessing a Franchise
  • Business format
  • Term of the license agreement
  • Site development
  • Capital required per unit
  • Franchise fee and royalties
special delivery system
Special Delivery System
  • The way resources are arrayed to meet consumer demand
    • Creates competitive advantage by examining the specific needs of the target customer
      • Wendy’s drive-through window
      • Jiffy Lube’s bi-level facilities
training and operational support
Training and Operational Support
  • Promotes the standardized, consistent delivery of the product
  • Reinforces the brand’s value
  • Transfers knowledge of the service delivery system (SDS) to the franchisees, both managers and line workers
field support
Field Support
  • Two forms:
    • Franchisor’s representative visits the franchisee’s location in person
    • Resident experts available for consultation at the corporate headquarters
marketing advertising and promotion
Marketing, Advertising, and Promotion
  • Funded and implemented at three levels

1. National

      • Franchisee contributes a percentage of top-line sales to the fund
      • Typically controlled by the franchisor

2. Regional

      • Stores within a set area contribute a percentage of top-line sales to the fund
      • Controlled by an area of dominant influence (ADI) advertising cooperative
marketing advertising and promotion1
Marketing, Advertising, and Promotion
  • Funded and implemented at three levels

3. Local

      • Franchisee makes direct expenditures on advertising
      • Controlled by franchisee but must be within guidelines set by franchisor
supply
Supply
  • Establishes quality standards of raw materials or goods used in the operation
  • Approves
    • Approves suppliers
    • Approves specific branded products