Franchise

• Owner of Franchises - Franchisees

• Parent company - Franchisor

  • Grants the franchisee to work under them

A franchise is made up of a franchisor and franchisees

A franchisor grants a license to a franchise so that it can sell the franchisor's products and services and pay for the rights to use the name, logo and marketing

Examples

• KFC

• Payless Shoe Source

• Starbucks

• Mothers

• Tastee's Patties

The franchisee pays for the franchise to trade in a given area, and will receive training and equipment from the franchisor

The franchise will be expected to share the profit with the franchisor

Franchisees and the franchisor are separate companies

A Franchise can take the form of a Partnership or Private Limited Companies (Sole Trader)

Advantages

• Only has to invest a limited amount of capital in each franchise

• The franchise has broader access to the international market

• Greater access to technical managerial and financial support provided by the franchisor

Characteristics

• Bears the name of the Co-Operation and good will

• Licensed by the parent company

• Easily recognized because of their logo

Disadvantages

• The franchisee loses control over the branding and image of the business

• Reduction in profit that the franchisee earns from having to pay royalties to the franchisor, and having to adhere to regulations established by the franchisor

• Must make regular payments to the franchisor

• The franchisee cannot expand outside the area agreed