Franchising Business
Copeland's Cheesecake Bistro
The world of culinary professionals, critics, gourmets, restauranteurs and food lovers continue to take notice of a prominent New Orleans entrepreneur - Al Copeland. Al and his restaurant concepts continue to surprise and delight locals and visitors alike.
Merchant: Restaurant.com
Starting a Successful Business
Setting up a small business and ensuring its survival can be a daunting task. One in three businesses fails within a year, mainly due to a lack of proper preparation and forward planning. "Starting a Successful Business" aims to help anyone get into business properly and survive.
Merchant: eBooks
Final Franchise Tax Report to be Submitted Prior to Dissolution
Socrates offers a full range of Business forms to help you do more and save
Merchant: Socrates Media LLC
Franchising (from the French for free) is a method of doing business wherein a franchisor licenses trademarks and methods of doing business to a franchisee in exchange for a recurring payment.
According to Financial Times, if sales by US franchise businesses were translated into national product, they would qualify as the 7th largest economy in the world.
Advantages
As practiced in retailing, franchising offers franchisees the advantage of starting up a new business quickly based on a proven trademark and formula of doing business, as opposed to having to build a new business and brand from scratch (often in the face of aggressive competition from franchise operators).
As long as their brand and formula are carefully designed and properly executed, franchisors are able to expand their brand very rapidly across countries and continents, and can reap enormous profits in the process, while the franchisees do all the hard work of dealing with customers face-to-face. See customer service. Additionally, the franchisor is able to build a captive distribution network, with no or very little financial commitment.
For some consumers, having franchises offer a consistent product or service makes life easier. They know what to expect when entering a franchised establishment.
Disadvantages
For franchisees, the main disadvantage of franchising is a loss of control. While they gain the use of a system, trademarks, assistance, training, and marketing, the franchisee is required to follow the system and get approval of changes with the franchisor.
In response to the soaring popularity of franchising, an increasing number of communities are taking steps to limit these chain businesses and reduce displacement of independent businesses through limits on "formula businesses." newrules.org (external)
Another problem is that the franchisor/franchisee relationship can easily give rise to litigation if either side is incompetent (or just not acting in good faith). For example, an incompetent franchisee can easily damage the public's goodwill towards the franchisor's brand by providing inferior goods and services, and an incompetent franchisor can destroy its franchisees by failing to promote the brand properly or by squeezing them too aggressively for profits.
Because litigation is expensive, the majority of franchisors have inserted mandatory arbitration clauses into their agreements with their franchisees. Since 1980, the U.S. Supreme Court has dealt with cases involving direct franchisor/franchisee conflicts at least three times, and two of those cases involved a franchisee who was resisting the franchisor's motion to compel arbitration. Both of the latter cases involved large, well-known restaurant chains (Burger King and Subway).