8 FRANCHISING

LEARNING OBJECTIVES
▪ Understand the role of the franchisor and franchisee

FRANCHISING
The franchisor is a company that owns the franchise. It has a track record of running a
successful business operation. It allows the franchisee to use its business ideas and methods in
return for a variety of fees.
Ex: KFC

FEATURES OF FRANCHISING
1) customers recognise and trust the brand name to help generate sales
2) help and advice about setting up the business
3) business starting equipment
4) help to find a bank that will lend money
5) new franchisee training
6) supply the materials for a product
7) marketing support
8) ongoing training given by franchisor

Fees
Franchisee has to bear the initial start-up fee and also for the purchase of the name. As the
sales will go on the franchisee has to pay a percentage of the sales.

ADVANTAGES TO THE DISADVANTAGES TO THE

FRANCHISEE FRANCHISEE
less risk profit is shared with the franchisor
back-up support is given strict contracts are signed
predictable set-up costs lack of independence
national marketing are organised expensive way to start a business

ADVANTAGES TO THE DISADVANTAGES TO THE

FRANCHISOR
fast method of growth
cheaper method of growth
franchisees take some of the risk
franchisees are more motivated than employees
FRANCHISOR
potential profit is shared with franchisee
may damage brand's reputation
franchisees might buy and sell goods elsewhere
high cost of support for franchisees

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