The aim of this term paper is to investigate the success of the sales system "Franchising" and to explain it theoretically. In this regard the concept of franchising and its origin are explained at the beginning.
Franchising is a generally and internationally accepted business system. In Germany there are more than 850 companies working with this selling system. During the last ten years the German franchise industry managed to double its sales from 22 € billion
to 48 € billion in 2010. I want to give a rough survey about the topic Franchising. How this business system
has developed, grown and expanded. What are the positive aspects of Franchising and what are the disadvantages of this system?
Table of Contents
1 Introduction
1.1 Topic & Objective of the work
2 Basic Conceptions
2.1 Franchising
2.1.1 Definition
2.1.2 History
2.2 Relationship between franchisor & franchisee
2.2.1 Franchisor
2.2.1.1Definition
2.2.2 Franchisee
2.2.2.1Definition
2.2.3 Franchise Contract
2.3 The Types of Franchising
2.3.1 Business Format Franchise
2.3.2 Product Distribution Franchise
2.3.3 Management franchise
3 Pros and Cons of Franchising
3.1 Pros of Franchising
3.2 Cons of Franchising
3.3 Franchising in Germany
3.4 Conclusion
Objectives and Core Themes
The primary objective of this term paper is to investigate the success of the franchise business model, providing a theoretical explanation of its mechanisms and exploring its historical development. It aims to offer a balanced survey of the system by analyzing both the operational advantages and the inherent disadvantages for the parties involved.
- Theoretical definition and historical evolution of franchising.
- Roles and contractual relationships between franchisors and franchisees.
- Differentiation of franchise types, including business format and management models.
- Analysis of the economic pros and cons within the franchise system.
- Overview of the growth and industry distribution of franchising in Germany.
Excerpt from the Book
3.1 Pros of Franchising
In 1977 Shelby D. Hunt, the professor of business from the University of Wisconsin – Madison exposes in his article: “In the 1960s, franchising was touted as holding great promise for (1) society in general, (2) franchisees, and (3) franchisors.” In his opinion “Society in general should benefit from franchising because of (1) decreased economic concentration; (2) lower failure rates for franchised business; and (3) increased opportunities for minorities and women.” Therefore in this time franchising was a step to gain independence one’s own business.
Nowadays the profit aspect is dominating. “Many practioners and some economists argue that franchising is a means of raising scarce capital”. This is a good reason for a company or a person which/who does not own enough proprietary capital and wants to expand quickly and see a growth potential. This is one of the “most important reasons why franchisors seek to franchise their business”.
On the other hand there is a financial reason which is just as important as the previous one: “The huge advantage of franchising is that expansion is largely funded by external financial sources, namely by the franchisees’ capital.” The next argument deals with the geographic and local aspect because the franchisor benefits by the franchisee’ local knowledge. “[...] they are also bringing to the table a wealth of local knowledge that it would otherwise be difficult or expensive to acquire. The franchisee will undoubtedly also bring local contacts and possibly even a few potential customers, despite their industry knowledge still being embryonic.”
The franchisees are advantageous “that they will be joining a franchise whose business model and commercial concept has been tried and tested over a generous period of time, which has a recognizable brand and a strong corporate image.” Therefore it is easier for the franchisee to penetrate news markets with the franchisor’s pre-assembled business format and expert knowledge. Consequently here is not much risk because of the strong and popular brand.
Summary of Chapters
1 Introduction: This chapter outlines the topic, provides the objective of the term paper, and introduces the prevalence of the franchise business model in Germany.
2 Basic Conceptions: This section defines the fundamental terminology, explores the historical roots of franchising, and examines the professional relationship between the franchisor and the franchisee, including the types of contracts and business models.
3 Pros and Cons of Franchising: This chapter provides a critical analysis of the advantages and disadvantages of the system, illustrates the growth of the German franchising market with statistical data, and draws a concluding summary of the model's viability.
Keywords
Franchising, Franchisor, Franchisee, Franchise Contract, Business Format Franchise, Product Distribution, Management Franchise, Capital, Economic Concentration, Market Penetration, Quality Control, Germany, Turnover, Business Model, Independence.
Frequently Asked Questions
What is the primary focus of this paper?
The paper focuses on the business system of franchising, exploring its development, core concepts, and its practical application as a successful sales system.
What are the central themes discussed in this work?
The central themes include the legal and operational relationship between franchisor and franchisee, the classification of different franchise types, and a comparative analysis of the benefits and drawbacks of the system.
What is the main research goal?
The goal is to investigate the success factors of the franchising model and to provide a comprehensive theoretical explanation of how it functions in the modern economy.
Which scientific method is applied?
The paper utilizes a literature-based theoretical approach, analyzing industry definitions, academic articles, and market statistics to describe the mechanics of franchising.
What topics are covered in the main section?
The main section covers basic definitions, the historical evolution of franchises, the contractual obligations of partners, specific types of franchises, and an analysis of the pros and cons, specifically contextualized within the German market.
Which keywords best characterize the work?
Keywords include Franchising, Franchisor, Franchisee, Business Format Franchise, Market Penetration, Quality Control, and Economic Growth.
How is the relationship between a franchisor and a franchisee defined in this text?
It is defined as a collaboration between legally and financially separate entities where the franchisor provides rights, training, and brand access, while the franchisee provides capital and local operational management.
What specific issue is highlighted regarding the quality of franchise operations?
The paper highlights that quality control is a significant challenge, noting that franchisees must adhere strictly to established procedures, with the Burger King case in Germany cited as an example of failure to maintain these standards.
How has the German franchise industry performed according to the data provided?
The data indicates a continuous growth in turnover, rising from 44 billion Euro in 2009 to 61.2 billion Euro in 2012, reflecting a strong expansion within the region.
- Citar trabajo
- Anonym (Autor), 2014, What Are the Main Features of Franchising? Advantages and Disadvantages of a Franchise System, Múnich, GRIN Verlag, https://www.grin.com/document/931866
