Franchising is known as a cooperative contract by

Businessman, Dream Take action

Excerpt via Essay:

Franchising is known as a cooperative arrangement by which one particular firm (the franchisor) provides the right to industry goods and services under its brand and uses its business practices to a second firm (the franchisee). As a great organizational form, franchising can be described as hybrid between market and hierarchy”(Gomez, Gonzalez and Vazquez, 2010, g. 463). The franchisor plus the franchisee perform an important role in making a certain brand name powerful. In fact , roughly any standard franchisor could keep 15% of the business within their network and operation the remaining 85% to additional interested companies or people. This requires a good functioning relationship between the franchisee as well as the franchisor intended for the shared success of both the worried parties.

Function of a franchisee

As mentioned previously, the franchisee is a company or person that takes franchise for a particular brand name and helps bring about it among the local people. The franchisee is usually an entrepreneur in each and every sense since the individual or perhaps firm makes a certain amount of investment in the business and manages the net revenue or loss that comes up out of the businesses of the particular franchise product. There are two kinds of franchising units and perhaps they are single unit and multi-unit. In the case of single unit, the franchisor offers a new outlet to a fresh franchisee while in the case of a multi-unit franchising, the franchisor offers a new outlet to an existing franchisee.

The profits attained from the outlet are stored by the franchisee after making two important payments to the franchisor – royalty for each and every sale and reimbursement for the training and knowledge approved to the franchisee for the successful operation of the outlet. There is a enormous potential to generate vast amounts pounds for the franchisee as the brand name is established and everything that the franchisee has to perform is to cater it to the local community. Naturally, the franchisor also constitutes a large amount of cash by way of vips from the dispenses. This distributed profitability is one of the main reasons to get the continued success and popularity with the franchising business.

Importance of franchisor-franchisee relationship

Franchising is an important part of economic growth and wealth generation and this makes the romantic relationship between a franchisor and franchisee vital for everyone. There ought to be a good amount of shared trust and open conversation between the franchisee and the franchisor and this is achievable only when each of the staff members from the franchisor be familiar with importance of the relationship to the future of their organization. It is estimated that forty-five hundred business businesses using more than 600, 500 outlets can be found in the United States today and this accounts for more than one-third of all the sales. (Spinelli, Rosenberg and Birley, 2004). This kind of huge amount of franchising presents immense options for the franchisor, franchisee and the economy at large as a result of numerous careers and income that it generates.

A good example is a Subway cafe that has been consistently named by the Entrepreneur publication as the number-one franchising opportunity for 13 years coming from 1990 to 2005. Using more than 24, 500 outlets in 23 countries around