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Franchising To Expand A Business Essay

2528 words - 10 pages

Small Business FinanceFranchising - expanding a small businessContents;1.Introduction1.1.1. What is Franchising1.1.2. Who is involved? 31.1.3. How does it work? 42. Franchising In Australia2.1.1. A background on franchising< 52.1.2. Growth and future of franchising< 52.1.3. Relevance to SME sector 62.1.4. Code of Franchising73. Organisational and Structural Elements<3.1.1. Types of Entities 83.1.2. Documentation 83.1.3. Franchising fees 103.1.4. Relationships 104. Financing Elements - how to finance your franchise4.1.1. General 134.1.2. Options for finance 145. Conclusion 17References 181.Introduction1.1.What is Franchising?Franchising is a generic term that describes a way of doing business. In essence a model of business structure that relies on a relationship in which an owner (franchisor) of a business has licensed others (franchisees) to use a business system and trade name to market and sell products/services. Thus it is a marketing concept of delivering products and services that can be applied across a diverse range of businesses. The International Franchising Association has developed 75 different categories describing the businesses of its members.1.2. Who is involved?Franchising involves two parties:Franchisor - The franchisor is the initial owner of a business system which has been developed and proven to be a successful method of operating a particular business. As owner, the franchisor has the legal capacity to provide licences to others (franchisees). Typically the owner seeks to expand the business through a relationship with others who have similar objectives.Franchisee - The franchisee is the party that has entered into an agreement with the franchisor to use the trade mark / business name and business system in a defined outlet or territory.1.3. How does it work?Essentially the franchisee has agreed to be part of the franchisor's operation. In return for fees, the franchisee secures these rights for a set period of time and can expect from the franchisor:Training in business practices- Documentation on procedures- Advice and assistance in the operation and management of the business- Economies of scale in a number of business requirements; such as advertising and purchasing.2. Franchising In Australia2.1. A background on franchisingFranchising is not a new phenomenon with examples of franchising that can be traced back to the 1850s. An early model is the relationship of breweries and hotels in New South Wales.The prominence of franchising today had its beginnings back in the 1930's, with an explosion of the concept occurring in the 1950's as the development of fast food chains took off across the world -as experienced by McDonalds.In Australia there are more than 20 current franchisors that have been operating since before the 1960's; with some having been established in the 1930's.2.2. Growth and future of franchisingFranchising is reaching a level of dominance to a point that an independently run operation is...

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