CONCEPT ABOUT

FRANCHISING
A Written Report
Submitted by

Group 4

Leader: Pamela Bolante

Assistant Leader: Jenilyn Vargas
Kimberly Managbanag
Miles Deonaldo
 Franchising System

Franchise- a license granted by a business to another business to make and sell Goods/Services.

The franchisor -Is the owner of the business who grants the license, provide an established name
and national advertising to stimulate demand for the product or service potential dis advantages
are the lack of control that occurs when franchisors wants every business managed in exactly the
same way in some cases franchisors require that franchise owners is certain contractors or
suppliers that might cost more than others would in addition, franchises can be expensive , and
the high startup costs are followed with monthly payments to the franchisor that can run from 2%
to 15% of gross sales.

Franchisee- Is the person who purchase the business name, invest his or her money and owns
the business but does not have to develop a new product created a new company or test the
market.

Entrepreneurs who are considering buying a franchise should investigate the company
thoroughly, the prospective. Franchisee is legally entitled to a copy of franchise or disclosure
statements, including litigation and bankruptcy history, identities of the directors and executive
officer's financial information, identification of any products the franchisee is required to buy and
from who those purchase must be made.

Types Of Franchises

1. Product Distribution Franchising

2. It simply sells the franchisor's products and are supplier-dealer relationships. In
product distribution franchising, it licenses its trademark and logo to the franchisees but
typically does not provide them with an entire system for running their business. Most
often you can find this type of franchising is in automobiles dealers, softdrinks distributors
and gas stations.
3. Examples:
4. Pepsi
5. Exxon
6. Ford Motor Company
7.
8.
9.
 10.
11.

Business-format Franchising

Arrangement where a franchisee receives (in addition to the right to sell goods or services)
the franchiser's designs, quality control and accounting systems, operating procedures, group
advertising and promotions, training, and (in case of hotels and travel agencies) worldwide
reservation system.
Popular Business-Format Franchise

Restaurant Drugstore

Jollibee Mercury Drug

McDonalds The Generics Pharmacy

KFC Generika

Internet Caf
Convenience
TheNet.com
7-Eleven
Mineski Infinity
Ministop
Netopia Internet Cafe

Retail

BENCH Services

PENSHOPPE Mr.Quickie

Bench Fix Salon

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF OWNING A FRANCHISE?

ADVANTAGES
Owning a franchise allows you to go into business for yourself, but not by yourself. A franchise
provides franchisees (an individual owner/operator) with a certain level of independence where
they can operate their business. A franchise provides an established product or service which
may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of
a pre-sold customer base which would ordinarily takes years to establish. A franchise increases
your chances of business success because you are associating with proven products and
methods. Franchises may offer consumers the attraction of a certain level of quality and
consistency because it is mandated by the franchise agreement.

Franchises offer important pre-opening support: site selection, design, construction, financing,
training, and a grand-opening program

Franchises offer ongoing support: training national and regional advertising operating
procedures, operational assistance, ongoing supervision and management support, increased
spending power, and access to bulk purchasing

DISADVANTAGES

The franchisee is not completely independent. Franchisees are required to operate their
businesses according to the procedures and restrictions set forth by the franchisor in the
franchisee agreement. These restrictions usually include the products or services which can be
offered, pricing and geographic territory. For some people, this is the most serious disadvantage
to becoming a franchisee.

In addition to the initial franchise fee, franchisees must pay ongoing royalties and advertising
fees.

Franchisees must be careful to balance restrictions and support provided by the franchisor with
their own ability to manage their business. A damaged, system-wide image can result if other
franchisees are performing poorly or the franchisor runs into an unforeseen problem.

The term (duration) of a franchise agreement is usually limited and the franchisee may have
little or no say about the terms of a termination.
 Selecting a Franchise

Franchises are appealing to new entrepreneurs who want the reduced risk of a proven product

or service while still being their own boss. They can get support from the parent company or

fellow franchisees to ensure success. The hardest decision, though, is which franchise to join.

How will you choose?

Evaluate your Needs

Sometimes people start a business because they think theyll make a lot of money but the most

important thing that you should remember is you should start in an industry that you will enjoy.

So before you jump into any particular franchise opportunity, you need to start by knowing your

interests, needs and goals which may give a hint on what type of business will be fit for you.

Here are some typical questions that may help to get started in selecting a franchise business:

What do you want out of a business (It is your reason or goal you want to accomplish in

entering a particular business)

What do you like to do? (interest and hobbies)

What do you do well? (special skills and talents)

Which industry(s) involve your interests and use your skills and talents?

What products or services could you sell in this industry(s)?

Would you rather sell a product or service?

How much money do you have or do you want to invest? (Taking inventory of your

capital will give you a realistic sense of what franchise opportunities are possible)

Do your Research
The key to making an informed decision about whether to buy a franchise begins with due

diligence. These days information is easy to find - don't be shy - look for it - ask and satisfy all of

your concerns before you make your decision. Once you have made the decision to buy a

franchise business it is difficult to turn back. A wrong decision takes a few seconds to make, and

for some, a lifetime to put right.

So do your research by:

Ask existing franchisees

It can be hard to get an accurate picture even with expert help, but talking to individual

franchise owners can help because they can give you a realistic advice on the actual

operations and challenges that you may encounter.

Read franchise trade magazines, newspapers, and websites to know what type of

franchises are available for you.

You may read Directories such as:

The Franchise Opportunities Guide

The Executives Guide to Franchise Opportunities

Bonds Franchise Guide

The Franchise Annual

Franchise Handbook

How Much Can I Make?

Read articles and ads in business publications:

Inc.: www.inc.com

Entrepreneur: www.entrepreneurmag.com

Franchise Times: www.franchisetimes.com

Franchising World: www.franchise.org

 Franchise Update: www.franchise-update.com

The Wall Street Journal: www.wsj.com

USA Today: www.usatoday.com

The New York Times: www.nytimes.com

Attend franchising exhibitions.

Do some research about the demand for the products and services

Research about the reputation of the franchising companies, their claims about

pricing and any other relevant business claims or information you want to know.

Analyze the Market

You should have a market analysis to know the condition of the market for the goods or

services that the franchise offers. You can also do your own research to verify and supplement

the franchisor's numbers. Competition is another important factor to evaluate. You want some

competition to show that there is a demand for the product, but too much competition could

indicate that the market is saturated.

No competition at all could mean that the market for the product or service isn't big enough to

sustain franchises.

There are certain franchise sectors that are growing rapidly, such as children's services,

fitness, and health food franchises. If the potential franchise is in one of those areas and the

overall evaluation looks good, that may be a promising franchise to pursue.

The Franchise Disclosure Statement

The Franchise Disclosure Document (FDD) is a legal disclosure document that must be

given to individuals interested in buying a franchise as part of the pre-sale due diligence

process.

And it is governed by the ten-day rule. This is a cooling-off period in which franchisors must
give prospective franchisees 10 business days to think about their decision before they are

allowed to get the franchise agreement.

It includes information about:

The franchisor

The companys key staff

managements experience in franchise management

franchisors bankruptcy and litigation history

initial and ongoing fees involved in opening and running the franchise

required investment and purchases

responsibilities of the franchisor and franchisee

other franchisees in the system with contact information

The Franchise Agreement

The franchise agreement is the legal, written document that governs the relationship and

specifies the terms of the franchise purchase. Like the Disclosure statement, the franchise

agreement also enjoys a cooling off period. Prospective franchisees are legally entitled to

have the final franchise agreement for at least 5 business days before they are allowed to

sign. This gives them time to review and consider the terms of the agreement.

The franchise agreement is more specific than the Disclosure Statement about the terms of

the relationship between the franchisor and franchisee. A typical franchise agreement may

include specifics about:

The franchise system, such as use of trademarks and products

Territory
Rights and obligations of the parties: standards, procedures, training, assistance,
advertising, etc.
Term (duration) of the franchise
Payments made by the franchisee to the franchisor
Termination and/or the right to transfer the franchise