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what is franchising
Franchising is a method of engaging in business activity in order to market products or services to consumers. This method is based on collaboration between stand-alone enterprises which carry on their activities in different areas of the market yet forming a single network.
The basis for creating and running a franchise system is excellent organisational infrastructure within a specific enterprise which has knowledge and experience of a sales or production method for a product or service.
This know-how is supplemented by:
- A series of industrial property rights (in other words trademarks, distinguishing marks, trade names, designs and models, patents).
- A marketing programme covering advertising and marketing.
These taken together constitute the franchising package.
Expansion of a company's business activity via franchising is based on assigning the franchising package to an unlimited number of other enterprises with the aim of that package being utilised to make the system operate more competitively.
The enterprise offering the franchising package for use is called the Franchisor while the enterprise to whom the right to use and operate the franchising package is assigned is called the Franchisee.
Strategy, marketing and organisation of sales are based on the knowledge and plans which are managed and controlled by the franchisor.
In other words via a franchising agreement franchisees receive the existing organisational structure from the franchisor. In this way franchisees (without being connected to each other at all) become members of a single distribution network.
The franchising system is characterised by a high degree of uniformity which is expressed in all sectors of commercial activity, in other words uniform equipment and uniform appearance across the entire chain of stores, implementation of the same sales methods, uniform appearance of products and packaging, uniform appearance and conduct of staff in dealings with customers, same prices, etc.
This high degree of organisational uniformity leads to the creation of a tight-knit, creatively organised group of enterprises which results in:
- a single identity, brand name demand, and differentiates them from the unbranded competition
- effective and profitable marketing of system products to the market
- ongoing monitoring and adaptation to technological and financial developments.
This is achieved because the franchisor, which functions as the organisational centre, provides franchisees with ongoing, direct support based on their needs in each case by continually channelling knowledge, information, advice, and marketing and advertising programmes to them. |
