3. Franchising is a business model in which many different
owners share a single brand name. A parent company
allows entrepreneurs to use the company's strategies
and trademarks; in exchange, the franchisee pays an
initial fee and royalties based on revenues. The parent
company also provides the franchisee with
support, including advertising and training, as part of the
franchising agreement.
http://www.wikinvest.com/concept/Franchising
Definiton
4. Franchising is a faster, cheaper form of expansion than
adding company-owned stores, because it costs the
parent company much less when new stores are owned
and operated by a third party. On the flip side, potential
for revenue growth is more limited because the parent
company will only earn a percentage of the earnings
from each new store. 70 different industries use the
franchising business model.
http://www.wikinvest.com/concept/Franchising
5. The franchising business model consists of two
operating partners: the franchisor, or parent
company, and the franchisee, the proprietor that
operates one or multiple store locations. Franchising
agreements usually require the franchisee to pay an
initial fee plus royalties equal to a certain percentage of
the store's monthly or yearly sales. Initial fees vary
significantly across each industry.
http://www.wikinvest.com/concept/Franchising
How Franchising Works
6. • Franchisees require less initial capital than independently
starting a company and can use proven successful strategies
and trademarks.
• Franchisees are provided with significant amounts of
training, not common to most entrepreneurs.
• The franchisor benefits because it can expand rapidly without
having to increase its labor force and operating costs, using
much less capital.
• Franchised stores have a higher margin for the parent
company than company-owned stores because of minimal
operating expenses in maintaining franchised stores.
• http://www.wikinvest.com/concept/Franchising
Advantages of the Franchising Model
8. Is a form of foreign market entry based on a contractual
relationship, where a company (the licensor) grants rights to intangible
property to another company (the licensee) to use in a specified
geographic area for a specific period time and the licensee ordinarily
pays a royalty to the licensor.
LICENSING
9. Contractual relationship
Licensor
Licensee
Rights
Intangible property
Payment (Royalties)
Specified geographic area and specific period time
ELEMENTS
10. Is the relationship that exists between parts to
sign a contract, establishing rights and
obligations
Contractual relationship
11. Licensor: Is obliged to furnish technical information
and assistance, agrees to make available to
another company abroad, use of its patents and
trademarks, its manufacturing processes, its trade
secrets, and its managerial and technical services
Licensee: Is obliged to exploit the rights effectively
and to pay compensation to the licensor, agrees to
pay the licensor a royalty or other form of payment
according to a schedule agreed upon by the two
parties
LICENSOR AND LICENSEE
12. May be exclusive (the licensor can give rights to
no other company) or nonexclusive (it can give
away right)
RIGHTS
13. Include any item of worth that is not physical in
nature.
Patents, inventions, formulas, processes, design
s, patterns
Copyrights for literary, musical, or artistic
compositions
Trademarks, trade names, brand names
Methods, programs, procedures, systems
Manufacturing techniques
INTANGIBLE PROPERTY
14. The amount and type of payment for licensing
arrangements vary. Each contract tends to be
negotiated on its own merits. For example, the
value will be greater if potential sales are high.
PAYMENT (ROYALTIES)
