Mana 3325 Test 2
Franchising - correct answer ✔✔A system of distribution in which semi-independent business owners
(franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become
identified with its trademark, to sell its products or services, and often to use its business format and
system.
Types of Franchising- Trade-Name - correct answer ✔✔A franchise purchases the right to use the
franchiser's trade without distributing particular products under the franchiser's name. Includes brand-
name stores such as True-Value hardware stores.
Types of Franchising- Product Distribution - correct answer ✔✔A franchiser licenses a franchisee to sell
its products under the franchiser's brand name and trademark through a selective, limited distribution
network.
ex. Dealerships and gas stations
Types of Franchising- Pure Franchising - correct answer ✔✔A franchiser sells a franchisee a complete
business format and system. It is also the most popular type of franchising. Examples include fast-food
restaurants
Financial Assistance - correct answer ✔✔Purchasing a franchise can be expensive,just as expensive as
starting an independent business.
Franchisers often assist franchisees with additional funding, smaller franchise operations are more likely
to fund new franchisees.
The Small Business Administration (SBA) has created a program called the Franchise Registry that is
designed to provide financing to franchisees through its loan guarantee programs.
Greater chance for success - correct answer ✔✔The success rate of franchisees is higher when a
franchise system does the following
- Requires franchisees to have prior industry experience
- Requires franchisees to actively manage their stores (no "absentee" owners)
- Offers training programs designed to improve franchisees "knowledge and skills"
, 10 Myths of Franchising - correct answer ✔✔1. Franchising is the safest way to go into business because
franchises never fail.
2. I'll be able to pay to open my franchise for less money than the franchiser estimates
3. The bigger the franchise organization, the more successful i'll be
4. I'll use 80% of the franchiser's business system, but i'll improve on it by substituting my experience and
know-how
5. All franchises are basically the same
6. I don'y have to be a hands-on manager, i can be an absentee owner and sill be very successful
7. Anyone can be a satisfied, successful franchise owner.
8. Franchising will solve my business problems for me, after all, that's why i pay an ongoing royalty.
9. Franchising is the cheapest way to get into business for yourself.
10. Once i open my franchise, i'll be able to run things the way i want to.
Trends Shaping Franchising- Growth and Niche markets - correct answer ✔✔3 Major Growth Trends
- 70's Fast-Food restaurants franchises grew rapidly
- 80's U.S. economy shifted heavily to service sectors
- 90's to present heavy shifts towards niche markets with low-cost franchises.
Master Franchise - correct answer ✔✔A method of franchising that gives a franchisee the right to create
a semi-independent organization in a particular territory to recruit, sell, and support other franchises.
Franchising - correct answer ✔✔A system of distribution in which semi-independent business owners
(franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become
identified with its trademark, to sell its products or services, and often to use its business format and
system.
Types of Franchising- Trade-Name - correct answer ✔✔A franchise purchases the right to use the
franchiser's trade without distributing particular products under the franchiser's name. Includes brand-
name stores such as True-Value hardware stores.
Types of Franchising- Product Distribution - correct answer ✔✔A franchiser licenses a franchisee to sell
its products under the franchiser's brand name and trademark through a selective, limited distribution
network.
ex. Dealerships and gas stations
Types of Franchising- Pure Franchising - correct answer ✔✔A franchiser sells a franchisee a complete
business format and system. It is also the most popular type of franchising. Examples include fast-food
restaurants
Financial Assistance - correct answer ✔✔Purchasing a franchise can be expensive,just as expensive as
starting an independent business.
Franchisers often assist franchisees with additional funding, smaller franchise operations are more likely
to fund new franchisees.
The Small Business Administration (SBA) has created a program called the Franchise Registry that is
designed to provide financing to franchisees through its loan guarantee programs.
Greater chance for success - correct answer ✔✔The success rate of franchisees is higher when a
franchise system does the following
- Requires franchisees to have prior industry experience
- Requires franchisees to actively manage their stores (no "absentee" owners)
- Offers training programs designed to improve franchisees "knowledge and skills"
, 10 Myths of Franchising - correct answer ✔✔1. Franchising is the safest way to go into business because
franchises never fail.
2. I'll be able to pay to open my franchise for less money than the franchiser estimates
3. The bigger the franchise organization, the more successful i'll be
4. I'll use 80% of the franchiser's business system, but i'll improve on it by substituting my experience and
know-how
5. All franchises are basically the same
6. I don'y have to be a hands-on manager, i can be an absentee owner and sill be very successful
7. Anyone can be a satisfied, successful franchise owner.
8. Franchising will solve my business problems for me, after all, that's why i pay an ongoing royalty.
9. Franchising is the cheapest way to get into business for yourself.
10. Once i open my franchise, i'll be able to run things the way i want to.
Trends Shaping Franchising- Growth and Niche markets - correct answer ✔✔3 Major Growth Trends
- 70's Fast-Food restaurants franchises grew rapidly
- 80's U.S. economy shifted heavily to service sectors
- 90's to present heavy shifts towards niche markets with low-cost franchises.
Master Franchise - correct answer ✔✔A method of franchising that gives a franchisee the right to create
a semi-independent organization in a particular territory to recruit, sell, and support other franchises.
