Characteristics Of Franchising Business Research Assignment (Essay Sample)

FRANCHISING BUSINESS
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Franchising Business
1 Characteristics of franchising business
It is worthwhile to know something before describing its make-ups. Franchising business is that type of business whereby the franchisors sell their business identity like name, logo, and model to another person preferably a third party, franchisee. McDonalds and Subway are some examples of franchise business. They are multinational businesses which operate globally. Due to this reason, it is prudent to be included in this assignment as it involves international and global marketing. It is through the course that one will be able to clearly classify this type of business as international venture. The concept covers a wide area of business transactions. It is a distribution system in which a sole franchisee distributes products to a franchisor’s designed area of operation. The franchisee is given a particular area as per contract dictates with a view of promoting sales in a particular manner in the specified location. It is more of a license which allows an individual or firm to operate or sell specified products in a confined environment as stated by the contractual agreement (Jupe & Funnell 2017, pg.852).
Franchising business has distinctive characteristics that make it unique. It falls in the category of well- established businesses. It is kind of readymade which only needs slight expansion in a different market. Its expansion will large be dependent on the local representatives who have market experiences and secrets of the business environment in a given place. For instance, Subway is already big and known worldwide but its expansion in a particular nation like United Kingdom will depend on agents and other representatives in UK. A business franchise needs a little bit of limited investment. This can be due to the fact that most of the business have large background of investment which limits additional input of resources. Actually, excess investment without thorough analysis is detrimental to any firm’s profit maximization. It means that resource utilization is compromised thus directly affect the overall performance of the whole organization. This calls for strategic decision making while it comes to investment, especially the capital one or else the firm will become bankrupt.
Entry in the new markets is made easy and possible because the firms are few in number and location. There is no market dominance like other business types such as merchandising and hospitality. The entry needs only a few and unique requirements like goodwill and reputation. The firm will develop and increase in its productivity level due to its good reputation it has with relevance to customer satisfaction. In most cases, such firms have great ethical comments thus helps in creating good rapport with various stakeholders hence goodwill is achieved. Franchise business is usually easily accepted in the market. This type of business has large establishments like McDonalds. They have a vast area of operation combined with several networks in different places in the world. It is through the local representatives’ network that different products reach to their customers in a timely manner.
The secret of franchise business is the spread of risk. It has different warehouses spread across the world to reduce the risk of losses. Many countries have different rules and laws pertaining to the business operation, since franchise business is international and global, it has a leeway in operating in most places due to its diversity. It has incorporated different cultures which come in a different perspective of doing business hence unity in diversity is promoted. Expounding on the same, large turnover is always evident in most franchise businesses. This is attributed to the large volume of sales that the company usually involve itself in. The society in general get psyched up by the management of the franchisor as well as the franchisee’s skills. The root gaining of this type of business relies on the brand name as well as bumper publicity.
In most instances, the business has a distinctive differentiation of labor and specialization. It often results in certain aspect of division of labor due to its size and operation. To a given extent, it follows the unity of command to the latter in order for it to function efficiently and effectively. Most of the time franchisor usually concentrates on production while distribution and unit service level is done by the franchisee. This helps in role defining as no party overrides the responsibilities of the other. The business is usually based on mutual agreement between the franchisor and the franchisee. In an attempt of dispute avoidance, agreement is often drafted in a detailed manner that sets clear reasons and intentions to it. The agreement must adhere to the terms and conditions of franchising. Franchise business needs a long-term relationship with its continuity and success (Wu et al., 2015, pg.864). Both the parties have to remain committed to their binding agreement which always rewards.
Makes of a business becoming a Franchise
Franchise business can be made by several things. The aforementioned business must operate under a specific law preferably in the country it is located. This is because it involves selling of products or brand name whose acquisition will affect the customers who are the citizens of a given country. The nation has to ensure that any business operating with its territory is good and affects its citizens positively. In most of the time, businesses like this flourish because of their lower operation cost since they tend to follow the law within their jurisdiction to the latter. They have simpler management because franchisees are always responsible for their actions and ensure that act in accordance with the Franchise Agreement as well as Operating Manual. Most of the managers are franchisees hence require less detailed management required by employees of the firm thus cut the cost of duplication of duties.
The franchise business like McDonalds has an attribute of greater commitment. Most franchisees know that they have invested in the business and benefit directly as well for its success hence they will put all their energies to get value from the business . It is due to this reason that puts forth the uniqueness of this type of business. They have better market penetration in big cities and command great market dominance. This feature brings out the uniqueness of the business as many firms concentrate on a single market segment thus neglecting other portions which is exactly opposite for a franchise business. When they have better market penetration, their expansion is accelerated to a given level that these other ordinary businesses have no that capacity.
Franchise business has a great international potential which accrues to it several advantages. It has a unique feature like Master Franchising has the capacity of replication whereby a model in the USA can be used in another country, for example, The United Kingdom. The system has its language which customizes business as well some legal requirements. As earlier indicated, it is being run by franchisees of which minimizing the recruitment process and criteria. This explains why most of the franchise businesses do not recruit regularly or made their vacancy available for the public to be selected.
Methods of Marketing and Selling Franchise
It is good and best for the firm if it let prospective customers know the value they usually add to products or services. It is really difficult for prospective customers to have knowledge concerning a particular product or service unless they are made to and this the role of marketing and selling. A franchise business ought to have a marketing and selling department so as to increase its revenue base (Kacker et al., 2016 pg.524). The business has different ranges of marketing its activities. Advertisement method using print media or mass media like Television networks helps in creating awareness of the existence and operations of the business. However, the world has turned into a global village whereby the old methods of operation cannot apply therefore creativity and innovation is called for. A creative innovative advertising campaign across different platforms in different places will surely realize best return on investment. For instance, creating a mobile app with minimal subscription feel will be substantial as majority of people globally at least have smart phone.
Direct mail like e-newsletters and drip email campaigns that the franchise business can use to access to its esteemed customers. The firm has to have an effective sales process system that will enable it to effectively account for the reorder and order points which will help in market sustainability. There are different methods of sales for a franchise firm like person-to-person, phone sales, and telemarketing. Promotions like sweepstakes or customer appreciation dinner for attracting both new and existing buyers for commitment in the firm’s products or services. Enhancing public relations like press releases relating to the operation of the company and its plans for its customers. An online marketing platform whereby the firm puts forth its profile of activities then refer customers for more information and enquiries. The firm can outsource for consultation if it does not have the capacity of marketing and selling its products and services (Mbah 2017, pg. 41).
2 Critical Analysis of McDonalds using PESTEL Analysis
PESTEL is an acronym of Political, Economic, Social, Technological, Environmental, and Legal factors that affect the operation of McDonalds. McDonalds in a political environment because of its international nature. It has to operate in countries which have their own policies like t...