(Ans a) An unbroken relationship within which a franchisor
provides an authorized privilege to the franchisee to try to
business and offers help in organizing, training, marketing,
selling, and managing reciprocally for a financial thought.
Franchising may be a kind of business by that the owner
(franchisor) of a product, service or methodology obtains
distribution through connected dealers (franchises).
A franchise pays an initial fee and in progress royalties to a
franchisor; reciprocally, the franchisee gains employment of a
trademark, in progress support from the franchisor, and also the
right to use the franchisor's system of doing business and sell its
product or services.
(Ans b) Benefit of franchisor
Franchisors take pleasure in franchise agreements as a result they
permit companies to expand rather more quickly than they may
otherwise. An absence of funds and employees will cause a company
to grow slowly. Through franchising, a company invests little
capital or labor as a result of the franchisee provides each. The
parent company experiences rising with very little money
risk.
A company may guarantee it's competent and extremely impelled
owners and managers at every outlet by franchising. Since the
owners are mostly chargeable for the success of their shops,
they're going to place in an exceedingly robust and constant effort
to form certain their businesses run swimmingly and prosper.
Additionally, companies are able to offer franchising rights to
solely qualify individuals.
Other benefits include:
Franchising permits a business to own a global presence.
Franchisors will expertise economies of scale.
Franchisors will take pleasure in growth without concern concerning
running prices.
Franchisors receive royalty payments that square measure set as a
share of profits.
Some challenges face by franchisor
Difficult to regulate activities of franchises: In any franchise
agreement (particularly once there's geographical separation
between the franchisors and also the franchisee), it is often
troublesome to regulate the activities of the franchisee and make
sure that their activities are up to straightforward. Huge risk in
name by permitting different businesses to use their names: if a
franchisee doesn't live up to the standard standards of the
franchisor (cleanliness, client service, pricing, quality of
product, etc.), this may have a negative reputational result not
simply on the franchisee, however, on the broader name of the
franchisor in addition. Thus, there's a risk in permitting others
in a roundabout way connected to the business to use the business
name and trademark.
(Ans c) A business subsidiary may be a separate business
closely-held by the most or parent organization. The amount of
management that the parent company exerts on the subsidiary body
varies from one organization to a different and depends on numerous
factors like capital share, managing share and employees.
While franchising business model is one that offers property rights
of the corporate to the franchisee together with emblems,
copyrights and trade secrets. Franchisor grants IPs to franchisee
throughout the franchise contract.
A business subsidiary is partially or entirely closely-held by the
parent company. For instance, a known bank X started their share
commerce company, Y. Here Y is also an entirely closely-held
subsidiary of X. Sometimes, company Y might collectively be
closely-held by the corporations X and Z.
On the opposite hand a franchise may be a business agreement
between a parent company and one or several tiny business entities
/ people (franchisee). For instance, bank X started their share
commerce business in an exceedingly franchise model. Corporation A,
B, and C took franchise. Here the three companies are separate
however, all are franchises of X.
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