Franchising
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- Date Submitted: 04/07/2011 02:52 AM
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Franchising is undoubtedly the most innovative and efficient form of organization yet devised to distribute products or services
In the complex world of business nowadays, companies always search for new methods which enable them to gain competitive advantages. A franchise is one of those effective ways to increase companies’ profits. It is a business models that parent company, franchisor, authorizes their franchisees to sell their products and/or services. The franchisor controls the method of conducting business of franchisees such as manufacturing, sales, marketing and management to meet the parent company’s quality standard. As stated in Allbusiness.com website (n.d) ‘A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and individual or group wishing to use that identification in a business…’.Why franchising is the most innovative and efficient form of organization? We should look back to its history and then analyze its functions.
The first franchise
The concept of franchising has been around for a long time. The idea of selling off a part of business to expand into new market or maintain a major part of business usually came from the lack of investment fund from business owners. Through their creativity they were able to keep the business alive by selling franchise opportunities to the new entrepreneurs.
Younger (1995) noted that the first franchise system has been developed by Singer Company. In the 1850’s the company manufactured sewing machines and sold them by creating a network of dealers. Singer provided retail system, trained and delivered the format of shop management to the dealers. Their franchisees, dealers, paid Singer a fee to work in a particular area and earned money for each sale of a sewing machine they bought from the parent company and then resold.
Their significant in the beginning of the franchise and the opportunities it crated came from the...
In the complex world of business nowadays, companies always search for new methods which enable them to gain competitive advantages. A franchise is one of those effective ways to increase companies’ profits. It is a business models that parent company, franchisor, authorizes their franchisees to sell their products and/or services. The franchisor controls the method of conducting business of franchisees such as manufacturing, sales, marketing and management to meet the parent company’s quality standard. As stated in Allbusiness.com website (n.d) ‘A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and individual or group wishing to use that identification in a business…’.Why franchising is the most innovative and efficient form of organization? We should look back to its history and then analyze its functions.
The first franchise
The concept of franchising has been around for a long time. The idea of selling off a part of business to expand into new market or maintain a major part of business usually came from the lack of investment fund from business owners. Through their creativity they were able to keep the business alive by selling franchise opportunities to the new entrepreneurs.
Younger (1995) noted that the first franchise system has been developed by Singer Company. In the 1850’s the company manufactured sewing machines and sold them by creating a network of dealers. Singer provided retail system, trained and delivered the format of shop management to the dealers. Their franchisees, dealers, paid Singer a fee to work in a particular area and earned money for each sale of a sewing machine they bought from the parent company and then resold.
Their significant in the beginning of the franchise and the opportunities it crated came from the...