What is franchising? Benefits and cost of franchising to the franchsee and the franchisor.

Essay by taim_007University, Bachelor'sA-, July 2006

download word file, 7 pages 3.7 1 reviews


The purpose of this report is to discuss the concept of franchising. Franchising has evolved over the years and has become the most popular form of business ownership today (Baron & Shane, 2005). Therefore to understand the concepts of franchising this report will firstly provide the definitions of franchising and will also examine the types of franchising. Secondly, the report will discuss the benefits and drawbacks of franchising. The report will also provide examples of successful franchise businesses. Finally the report will discuss the future of franchise business.

2.0 Definitions of Franchising:

In general, franchising is a market-expansion method wherein a successful business (franchisor) enables independent operators (franchisees) to use its operating system, trademarks or service marks and marketing system to distribute its goods and services in exchange for franchise fees and royalties (Baron & Sharon, 2005). However, Jewell (1999) has his own definition of franchising. He defines franchising as a provision of a specialized sale or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.

Hall, chamber and Squires (1999) provide a detailed definition of franchise business. They explain franchising as a continuing relationship in which the franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing, and managing in return for a consideration. Franchising is a form of business by which the owner (franchisor) of a product, service, or method obtains distribution through affiliated dealers (franchisees). The product, method, or service being marketed is usually identified by the franchisor's brand name, and the holder of the privilege (franchisee) is often given exclusive access to a defined geographical area (Hall, Chamber & Squires, 1999).

After having discussed the definitions of franchising it is vitally important to discuss the types of franchising.