Success: Chpt 4By: Rachel Lawrence, Austin Payne, and Lauren Williams

Franchise

A huge business in the U.S., franchising is when a franchisor sells his successful business model to franchisees. “At the heart of a franchise agreement is the desire by two parties to make money while avoiding risk.”

The franchisor wants to expand an existing company without spending his own funds. The franchisee wants to start his or her own business without going it alone and risking everything on a new idea.

Franchise

Enabled new fast food chains to expand rapidly by raising the hopes and using the money of small investors.

Traditional methods of raising capital were not readily available to the founders of these chains, the high school dropouts and drive-in owners who lacked “proper” business credentials. Banks were not eager to invest in this new industry; now was Wall Street.

Dunkin’ Donuts and Kentucky Fried Chicken were among the first chains to start selling franchises.

McDonald’s perfected new franchising techniques, increasing the chain’s size while maintaining strict control of its products.

Franchising proved to be a profitable means of establishing new companies from auto parts (Meineke Discount Mufflers) to the weight contrul business (Jenny Craig International)

1999, Congressman Howard Coble-introduced legislation that would make franchisors obey the same fundamental business principles as other American companies. Coble’s bill would for the first time obligate franchise chains to act in “good faith.”