Franchising is a form of business in which a product or service may be provided by people or firms who have obtained a license from the originators or owners of that product or service.
A franchise agreement is drawn up in which the rights of the two parties are set down. The parties to the agreement are:
a) the franchisor — usually the person or firm who develops a new product or service under license
b) the franchisee — the person or firm who buys thelicense granting the right to provide the product or service.
The franchisor will have tried the product out by piloting it for a reasonable trading period before selling it to potential franchisees. The franchisee is provided with a total package for marketing the product, including the product's name and logo, any patented processes, accounting procedures, marketing strategy and training services. The franchisee has to raise capital to pay the franchise fee, find suitable premises, equip them according to the franchisor's house-style, buy or lease equipment, and market the product to the standard specified by the franchisor. The franchisee is not employed by the franchising company, but has to establish and operate his own business. The fees are to be paid to the franchisor throughout the term of the franchise, usually as a royalty, for example a fixed percentage (typically 10%) of weekly takings.
Franchising provides the opportunity of developing business without having large capital sums. For the franchisee it:
a) enables people to go into business with limited risk and outlay,
b) insures that the product or service has been thoroughly tested and marketed before the franchise has been approved,
c) provides a well-known brand name and image, and large-scale advertising back-up,
d) requires less capital than other forms of business start-up,
e) provides continuing back-up support and advice during the period of the franchise agreement.
3адание 1. Answer the questions:
1. What is business?
2. What is an entrepreneur?
3. What are the forms of small business?
4. What are the advantages and drawbacks of small business?
5. What is a partnership?
6. What are the main differences between public and private companies?
7. What are the types of companies?
8. What is acorporation?
9. What is franchising and what are its advantages?
Decide which of the advantages and disadvantages below you would associate with the following forms of business. In some cases there may be more than one correct answer.
1. a sole trader
2. a partnership
3. a private limited company