Making the Right Franchising Opportunities
Introduction
Today, in many countries franchising has become an important form of business ownership. As Webber (2016) reports, franchising business started in the United States, with the country recording most franchising enterprises than any other state across the world. Dada, Watson, and Kirby (2015) argue that as the pioneer of franchising, in the U.S., there are 909,253-franchised businesses. The growth of the franchised business in the U.S. has been significant to the American economy and the society. As such, the established franchised business in the U.S. has provided over 21 million jobs and gave the country $2.31 trillion of annual output (Dada, Watson, and Kirby 2015). Franchised businesses work well when the franchisees combine the franchising elements (Webber 2016). These elements include franchising brand, system, support, and franchised agreement. Combining these element ensure that the franchised business has a right franchise opportunity within the market. Based on this understanding, this paper focuses on analysing the franchising business by looking at how the elements work to give the franchisees a right franchising opportunity. The study will also discuss these elements as substantial business variables for different franchises.
Webber (2016) defines franchising as a system of marketing products and services that are based on an established legal and financial collaboration between a franchisor and franchisee. Along the same argument, Lashley and Morrison (2000) defines franchising as a business concept that comprises the owner of a trademark name and a commercial system (franchisor), where the franchisor transfers the business right of using the brand name to another person (franchisee) for a fixed period and in a prescribed geographical area. Webber (2016) reveals that a successful franchise system is based on four elements (franchising brand, system, support, and franchised agreement) and these elements are the franchising cornerstone that the business should use together. The franchising elements are seen as the key factors that will determine the success of the franchised business and whether the business achieves its goals.
The franchising Agreement is outlined in the franchise contract, which is set to define the rights and obligations of the parties pertained in the franchising activity. In the study examining the economics of franchise contract, Klein (1995) notes that franchise agreement is a self-enforcing element, which is adapted to create or facilitate a good relationship between the franchisor and franchisee. Altinay and Brookes (2012) argues that it is the responsibility of the franchisor and franchisee to use the needed effort to come up with a better relationship when signing up the agreement. For example, in a franchised business, the franchised goods and services are distributed by the franchisee under the franchisor’s trademark. In this case, for the franchisee to use the brand, the two parties involved should have specific agreements. Webber (2016) claims that for the franchised business to accomplish the desired outcomes, the agreement should be fair and ethical. The fairness of the agreement between the franchisor and franchisee is based on the code of ethics, and the contract defines the ways that disputes and termination should be applied if they happen to occur.
In franchising business, the franchise brand or the trademark is owned by the franchisor and it is the franchisor who has the right to give the franchise brand name (Webber 2016). In the UK, retail franchising issuing of the brand by the franchisor to the franchisee has achieved a significant level of concentration in the European market (Sanghavi 1991). Similarly, Webber (2008) points out that between 1991 and 2015, the UK franchising business has expanded; during this period, more than 901 franchise systems have been established. The transferring of the brand name of different product is one reason that has made the number of franchised business in the UK to increase enormously. Erlinda, Afiff, and Helmi (2012) cited that the brand name in franchising business is a major component as it influences the current and future purchasing. In other words, the franchising brand reflects the growing and development of the franchisor business and the way the franchisee can use the brand to improve sales and brand image for the owner of the brand.
As a third element of franchising, the system itself is a core component that defines how the franchised firm work and whether the franchisor can prove a working system. McDonnell, Beatson, and Huang (2011) assert that franchising system is based on the strength of the relationship between the franchisor and franchisee. In addition, McDonnell, Beatson, and Huang (2011) propose that franchised business in the modern markets should know that franchising system is not a guarantee of business success, where if it is not well managed and analysed, it can result into business failure. Frazer and Winzar (2005) support this argument by suggesting that a franchising system that does not specify on the business operation and if managed wrongly, it can lead to franchising termination, closures of the business, or franchisee exit. For instance, according to Webber (2016), it is evident that lack of a working a relationship in the concept of franchising system affected franchising business in the 1960s and 1970s. Webber (2016) suggests that in the 1860s, both the UK and U.S. were hit by product selling scandals that were related to the franchising business. The slowing of the franchising business is mostly influenced by the franchising system, which is a core factor that determines the franchising system.
In any franchising business, franchising initial support can be done in different ways. According to Webber (2016), a franchisor can carry out support through showing the franchisee the site to set the business, staff training, launching new marketing strategies, and helping the franchisee on the ways to implement their business plans. Additionally, in the franchising business is a major determinant of franchise success (Paynter and Arthanari 2001). Ioanna and Maria (2013) highlighted that it is significant for the franchisor to help the franchisee through educating him or her about the need for keeping the organisation culture and the brand of the business. Evidently, supporting the franchisee through training ensure that the franchisees are aware of the organisational goal and value. In fact, the success of a franchising business is based on regular training, guiding the franchisees on the site to set the business, and franchisors bringing new strategies that the franchisees can use to run the franchised business. For example, in the research by Webber (2008), it is stated that the franchisees are always faced with the challenge of identifying the best product to franchise. Thus, when the franchisors support the franchisees through educating them on the best site to set a business, this will give the franchisees ideas that will guide them on how to acquire the best franchise.
When the franchised business work by combining the four elements, this determines how well the franchising parties will work ethically and according to the legal requirements. Webber (2016) elaborates that when the franchised businesses conglomerate the franchising factors, this makes the franchisors and franchisees to work in a joint responsibility relationship that will make sure both parties achieve their objectives. Moreover, collaborating the listed franchising factors is a motivation for one to become a franchisee, as they each states the obligation of the franchisee and franchisor to the success of the franchised business.
As much as there are many ways that the franchised business can apply to become competitive, having a brand name, franchising system, franchising agreement, and supporting the franchisee together is one way for the franchising firm to acquire the competitiveness in the market. Garner, Greenstein, and McMonagle (2014) described that having the franchising system and brand name to work together serves the franchising business in an appropriate way, as the firm will have a working program that is based on the specification. This will make the franchisee to lead the business on top in the market and due to the competitiveness; it will have a well-organized system, which will be defined according to the brand.
Combining the franchising elements give the franchisees the opportunity to deliver the services and products as desired by the customers. Lim and Frazer (2004) suggest that with well-established trade names or trademarks, the franchisee work better when trained by the franchisor on the way to promote the product, carry out advertisement programs, and develop the product in strategic ways. When the franchisee combines the training given by the franchisor with the trademarks or brand name provided by an organisation, this gives the franchisee an opportunity of belonging to the competitive market, sell more than the competitors, and promote the brand together with the franchisees independent business. Equally, Davies, et al. (2011) found that the support that the franchisor offers to the franchisee determines the level of franchisee satisfaction; and in this case, the satisfaction is described by the mutual agreement between the franchisee and the franchisor. The franchising agreement needs to be supported in all manner, as it imposes compatibility and positive perception between the franchisor and franchisee, which will ensure that a good a relationship is preserved (Harmon and Griffiths 2008).
Davies, et al., (2011) note that many franchisors may use their power to exploit the franchisee to meet their expansion plans or even neglect the franchise with the aim of making the market less competitive. However, in the franchising business, the element of agreement can be used to ensure that this does happen, because the franchise agreement does explain the obligation of each party. Thus, when the franchisee and franchisor follow the terms and condition quoted in the agreement the franchisor will not exploit the franchisees under any circumstance. As cited by Khasawneh, Yaacob, and Rahman (2016), agreement is a core element of franchising and an important variable in international business. Global franchised firms use the agreement element to support and develop franchising in an orderly manner. For example, in Jordan, franchising agreements are viewed as an element that legally bound the franchisor and franchisee (Khasawneh, Yaacob, and Rahman, 2016).
As a business variable, the franchisees use the franchising system to buy the product that has been tested and tried by the franchisor. In this case, the system variable is used by the franchisees to determine whether the franchisor has proved that the product will give their business a reasonable chance of succeeding in the market (Webber 2016). Additionally, franchisees use the brand or trademark element as a variable that will guarantee them the success of their business. Awoseila (2011) argues that in Brazil, the international brand names are used by many franchisees as a variable that is meant to succeed their business operations. Lastly, the franchise brand is the key to a successful franchise operation, and therefore, being a major franchising variable (Webber 2016). In a franchise system, by using the brand name, the franchisor requires each franchisee to run its business in a similar manner just like other franchisees within the system.
Drawing from the many importance that the franchising elements have in the franchise system, one can conclude that though the franchise elements are different in nature, they are core factors that a franchisee need to embrace if he or she wants to succeed in franchising business. This paper has analysed each elements by its own, looked at the way these elements work together, and demonstrated why franchising elements are significant variables to the franchisees. However, for the franchising business to stand as one of the best globally, the franchisors should do more than just support and give the franchisee the right to use their trademark, because the more responsibilities they take, the better way franchisees will identify business opportunities and ensure that the firm’s expands. Finally, it is important for the franchised business to understand that the franchising elements moderate the relationship between the franchisor and franchisee, which brings out loyalty and cooperation within the industry.
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