What is Franchising?
Franchising is a relationship in which the service provider (franchiser) develops and optimizes a format of service that it licenses to other parties (the franchisees) for delivery.
In franchising, the franchiser, (service provider) licenses his brand name, business process or format, product, service or reputation in return for fees and royalties.
How do a franchise exist?
A franchise exists where one person grants rights to another to exploit an intellectual property right involving perhaps trade names, products, trade marks, equipment distribution.
Services suitable for franchise operations
Examples of services which are suitable for franchise operations include: accounting and tax services, beauty salons, car rental services, dry cleaning services, employment services, hotels, industrial services, garments, nursing homes, restaurants, travel agencies, etc.
Situations when franchising is suitable?
Franchising is suitable in situations where services can be standardized and duplicated through the delivery process service policies, warranties, guarantees, promotion and branding. In United States of America, many companies have found favor with franchising. NIIT has about 80 centres in the country operating as franchisees.
Factors influencing location of franchise
The success of a service business depends much upon the location of the service operations. This is particularly true when the customers have to come to service organization. The service firm should concentrate on the choice of location in order to make it convenient and accessible to customers. According to Raab and Maruskv, the following points should be borne in mind while selecting a quality site. Firm’s physical needs Space requirement Potential of the area.
Since the franchise is an extension of the service organization, services must be delivered at a convenient location which is accessible to customers.
The factors that govern the choice of location include
- Firm’s physical needs.
- Space requirements.
- Potential area.
- Internal competition.
- External competition.
- Traffic pattern.
- Quality of traffic.