Franchising

Franchising is:

A business system in which a company sells an individual the right to operate a business using the franchisor’s established system or format

It is the granting (giving) of a license to someone which enables this person to trade under that trade mark

The principle is simple: some companies choose to grow not by developing their production, but by selling their license to others who then sell their product or service

It is, in fact, a specialised form of licensing in which the franchisor (the owner of the license) sells intangible property to the franchisee and insists on rules to conduct the business

In this process a package of services (including product and trade name) is offered by the franchisor to the franchisee in return for payment

There are clear advantages in using franchising:

You don’t have to come up with a new idea-someone else has done it for you

Good franchisors will offer comprehensive training programmes for developing skills

Good franchisors can also help secure funding for your investment as well as outlets when you are in operation

Franchising offers:

The advantage of starting up a new business quickly based on a proven trademark and formula of doing business

Franchisors are able to expand their brand very rapidly across countries and continents and can have enormous profits in the process while the franchisees do all the hard work of dealing with customers face-to-face

Some disadvantages:

The main disadvantage for franchisees is a loss of control. While they gain the use of a system, trademarks and assistance from the franchisor, they are required to follow the system and get approval of changes.

Another problem is that the franchisor/franchisee relationship can easily cause litigation (legal conflict) if either side is incompetent.

For example: a bad franchisee can easily damage the public’s goodwill by providing inferior goods and services, and an incompetent franchisor can destroy its franchisee by inadequate promotion or by squeezing them too aggressively for profits.

The history of franchising:

Franchising dates back to 1850s. In those times there were franchising agreements between hotels and breweries. There was also the telegraph system which was operated by various railroad companies but controlled by Western Union.

Modern franchising developed rapidly with the practice of franchise based restaurants: Mc Donalds has been the most successful worldwide.

How franchsing works:

Imagine that you’re opening you own Mc Donalds. To do this, you have to buy the Mc Donalds franchise. In order to qualify for a conventional franchise you must have a large sum of money (not borrowed). Your total cost to open the restaurant will range between 430 000 to 750 000 dollars, which goes to paying for the building, equipment etc.

Fourty percent of this cost has to be form your own, non-borrowed fund.

You will pay an initial franchise fee of 45 000 dollars directly to Mc Donalds.

Then you must pass a rigorous, nine-month training period where you’ll learn about: the quality standards, about service, value, formulas, method of operation and inventory control techniques.

Once you’ve completed training you are ready to go. The exterior of the building will be complete, you will have to take care of the interior: kitchen equipment, seating... You’ll get constant support from a Mc Donalds Field Consultant, who can give advice and will visit regularly.

This is a good system: you pay someone for their business strategy which, if you are competent, can earn you big money.

An example: profile of Vanessa Stein

Three yeras ago, Vanessa and her husband Tom took up the fast food challenge: they bought the franchise for a Mc Donalds restaurant near Leeds.

Vanessa gets up at 6.30 and makes a mental list of her daily activities. She arrives at her restaurant around 8.30 and starts dealing with administration.

Their restaurant is in a retail park around five miles outside Leeds. They have already expanded the seating area and they want to expand the restaurant itself.

They have to conform to the Mc Donalds standards (quality, service, cleanliness and value) but the restaurant is actually their own business.

They employ 75 staff, order and pay for suppliers,take care of maintenance, arrange local marketing and so on.

Buying this franchise was a big move for them. Tom had to do nine months’ training before they could even be considered for a franchise.

Vanessa’s daily routine goes on and by 9.30 she eats breakfast and has a quick chat with their regular breakfast customers.

Then she checks the post which is usually invoices, bookings for parties and the reports from inspection.

These inspectors come as “mystery diners” and evaluate everything: food quality, presentation, atmosphere, quality and speed of service, restaurant cleanliness and so on.

A field consultant visits them every two or three weeks, and there are regular meetings with other franchisees to share ideas and experience.

The lunchtime rush starts around noon and, if they’re short staffed, Vanessa also serves customers.

Her own lunch is a salad or chicken sandwich. Then she deals with piles of paperwork and around 3 p.m. she goes home. She takes some of the work with her and finishes it in the kitchen.

Suffixes

Adverbs

Look at the way these nouns are formed:

NOUN STEM + SUFFIX

Assessment (assess + ment)Effectiveness (effective + ness)Regularity (reguar + ity)Administration (administer + ation)

Use the following suffixes to form nouns out of these verbs and adjectives: Confidential Organise Disagree Willing Similar Careless Prepare Present Popular Require Invest aware

-ment

-ness

-ity

-ation

Use the nouns you constructed in the following sentences:

1) Although they are not twins the _______ in the two sisters is striking.

2) I assure you the _______ will pay off. You won’t have to worry about your profit in the coming year.

3) The only ________ is that you stick to the franchisor’s rules.

4) She expressed her __________ and abandoned the meeting.

5) Not to reveal any business secrets means that you have to respect the ____________.

6) His ________ to succeed will launch him to the top of the management ladder.

7) Your _________ must be top quality and crative if you want to impress your superiors.

Make nouns by adding the correct suffix to the following words:

Flexible, dedicate, popular, fit, communicate, agree Use those words in the sentences:1) We are meeting next week to sign the lease _______

for the shop.2) Growing ________ of the stress-reducing benefits of

regular exercise has led to an increase in gym franchises.

3) Employees who take initiative and constantly seek ways to improve service are rewarded for their ____________.

4) Running your own business requires a lot of _________ as you often have to do whatever is needed to be successful.

Adverbs are used to complete the meaning of verbs in a sentence. Match these adverbs of time to their definitions: Always Recently Eventually Already Currently Sometimes Usually

Not long ago After a long time By now or before now At the present time On some occasions

but not all On most occasions All the time

Complete the passage below with the adverbs: currently, always, generally, recently, eventually, already By the time the shop opens, the bakery staff

have _____ prepared the daily supply of muffins, sweet American- style cakes, which are popular with our early-morning customers who ______ come in for a coffee and snack on their way to work. After the morning rush, we start making a selection of fresh sandwiches for the lunchtime crowd. We are ______ testing the popularity of a new line of hot Italian-style sandwiches called “panini”.

Mid-afternoon, when business slows down, I __________ spend an hour or two checking supplies and placing orders for the next day. _______, our sales have risen considerably, probably as a result of the ads we’ve been running in the local newspaper. If business continues to grow at the same pace, we may _______ expand our premises to include more seating.