FRANCHISING

Learning Objectives:

I. Understanding definition and concept of

Franchising

II. History of Franchising

III. Types of Franchising

IV. Advantages & Disadvantages of

Franchising
 What is franchising?

Franchising – refers to the method of

practicing and using another’s perfected

business concept. The word "franchise" is of

Anglo-French derivation— from franc, meaning

free. According to the International Franchising

Association, a franchise is "a continuing

relationship in which franchisor provides licensed privilege to do business plus assistance in

organizing, training, merchandising and management in return for consideration from franchisee."

In a franchise relationship, the franchisee is granted the right to market a product or a service

under a marketing plan or a system that uses the trademark, name, logo and advertising owned

by the franchisor.

Franchisor – is an individual or company owning rights or license of business. Also, it is a person

who grants the license or permission to various franchisee

Franchisee – an individual or a company who purchases and runs a franchise. It is the party in

franchising agreement that is purchasing the rights to use business trademarks, associated marks

& other proprietary knowledge in order to open branch.

History of Franchising

Isaac Merritt Singer American inventor, actor, and entrepreneur

After the US Civil War in the 1860s Singer had achieved the ability

to mass-produce his famous sewing machines, but had no

economically viable way of repairing and maintaining them across

a country as geographically vast as the USA.

He began to license out servicing and repairs to local

merchants around the country, who were later permitted to

become regional salesmen for the machines too. Singer’s

use of a contract for this arrangement introduced the

earliest form of franchise agreements, and the first modern

franchise system was born.

Types of Franchise

There are many ways to differentiate between different types of franchises (size, geographic

location, etc.), it can be figure out how different franchisors allow franchisees to use their name.

On this basis, there are three main types of franchise:

1.Business format franchise

2. Product franchise

3. Management franchise
Business format franchise – the integration of the business is more complete. The franchisee not

only distributes the franchisor’s products and services under the franchisor’s trade mark, but also

implements the franchisor’s format and procedure of conducting the business.

Example:

Product distribution franchise – is very much like a supplier-dealer relationship. The franchisee

merely sells the franchisor’s products. However, this type of franchise will also include some form

of integration of the business activities.

Examples
Management franchise – in this model, the franchisor also gives managerial assistance for the

franchisee for conducting the business other than operational, financial and technical support.

Top 15 Premium & Popular Franchise Business in the Philippines

1. Jollibee 10. Yellow Cab

2. McDonald’s 11. Shakey’s

3. Shell 12. ML Kwarta Padala Express

4. 7-11 13. Monterey Meatshop

5. Max’s 14. Mineski Infinity

6. San Miguel Food Ave 15. Tong Yang

7. Petron

8. National Bookstore

9. Quicklean
 The Advantages and Disadvantages of Franchising
While it offers plenty of benefits, a franchise business also carries some risks. Weigh carefully
the pros and cons of franchising before you decide whether to go for it or not.

ADVANTAGES DISADVANTAGES
Recognized and established brand Expensive startup costs

Tried-and-tested business model Limited flexibility and autonomy

Easier to get a great location Lock-in period

Training Support Business Risk

Pre-opening assistance

Marketing Support

Continuous research development

Faster ROI

Higher chances of success

Other opportunities
REFERENCES

https://grit.ph/best-franchise-business/

https://marketbusinessnews.com/financial-glossary/franchising/

https://whichfranchise.co.za/what-is-a-franchise/