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Franchising

Franchising. 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. Franchises.

joelle-pennington
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Franchising

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  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. 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: The franchisor:the business selling the right to trade its product or service; Thefranchisee: 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. 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 Why Franchise?

  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

  11. What Franchise is this?

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

  13. 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

  14. 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

  15. 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.

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

  17. 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?

  18. Examples • 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

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

  20. Case Study Page 31 - ‘Over to you’ Answer questions 1-4. Remember!! 1 mark – 1 minute

  21. Exam Zone…. Turn to page 32 and read ‘you should know’…. Jot down all the things you are not sure about. Have a go at practise exam questions (Page 33)

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