Franchising
The word franchise is often used today to describe a number of different business relationships. However the word should always refer to a system where one person or organisation, the franchisor, enters into an agreement to permit another, the franchisee, to use a commercial concept that is owned by the franchisor.
The agreement would normally include a grant of permission to the franchisee to use clearly defined intellectual property, marks and an operating procedure belonging to the franchisor.
“Franchising is an organised system of growth by which a business with a successful concept provides other people, in other locations, the rights and knowledge to copy exactly the success of the original.”
Paul M Tessller II President Coca-Cola Corp. 1953-71
Arguably modern franchising started in the USA around the turn of this century. The motorcar had just arrived. The new internal combustion engines were very temperamental and needed an oil/fuel mixture, much like two stroke engines today. Motorists quickly discovered which ‘mixture’ was right for their vehicle. They then wanted that mixture and no other.
The oil companies recognised that in order to develop market share and create customer loyalty they needed to offer customers universally the right mixture for each vehicle. Perhaps this was the first time that there was a need for a consumer product of a known quality and consistency to be available universally.
The oil companies set up local stations that offered the right mixture. The stations were independently owned but the name of the oil company and its logo was much more prominently displayed than that of the owner. The owners paid a fee for an exclusive territory, which was usually a length of highway. The owners and their staff were trained by the oil company in the methods of mixing the fuel. Owners and staff were asked to sign secrecy agreements. Stations could only sell the products made by or selected by or approved the oil company.
All these features and controls can form part of a franchise agreement today.
I said at the start of this section, that the oil companies were, arguably, the first franchisors. Some observers claim that the Coca-Cola Company was first. Coke offered the rights to dilute a concentrate and distribute product, in areas of the USA that they themselves didn’t cover. No fee was charged in the beginning so purists regard the arrangement as a simple distributorship agreement. Today there is no doubt that the Coca-Cola Company has the world’s biggest franchised manufacturing/distribution operation.
We all know McDonalds. You may not know that yesterday they opened a restaurant somewhere on earth every six hours. They will do so again today. McDonalds however is only the tiniest tip of the iceberg that is franchising. Indeed the business with the greatest number of franchised outlets is Subway Sandwich Restaurants with more than 25,000 units.
Around the world, millions of people earn their living every day directly or indirectly from involvement in franchising. Franchised distribution and foodservice operations are the fastest growing, in the history of the art of chaining. One new franchise opens for business, somewhere on Earth every two minutes.
Franchises now exist in almost every profession, trade and industry. From gynaecologists to undertakers. From florists to opticians. From engineering consultants to accountants. From railways to telephone companies – Sandwiches and pizzas just happen to be the best known.
Many of the best-known brand names in the World use franchising in whole or as part of their operations. Some are classical foodservice franchises like:
The agreement would normally include a grant of permission to the franchisee to use clearly defined intellectual property, marks and an operating procedure belonging to the franchisor.
“Franchising is an organised system of growth by which a business with a successful concept provides other people, in other locations, the rights and knowledge to copy exactly the success of the original.”
Paul M Tessller II President Coca-Cola Corp. 1953-71
Arguably modern franchising started in the USA around the turn of this century. The motorcar had just arrived. The new internal combustion engines were very temperamental and needed an oil/fuel mixture, much like two stroke engines today. Motorists quickly discovered which ‘mixture’ was right for their vehicle. They then wanted that mixture and no other.
The oil companies recognised that in order to develop market share and create customer loyalty they needed to offer customers universally the right mixture for each vehicle. Perhaps this was the first time that there was a need for a consumer product of a known quality and consistency to be available universally.
The oil companies set up local stations that offered the right mixture. The stations were independently owned but the name of the oil company and its logo was much more prominently displayed than that of the owner. The owners paid a fee for an exclusive territory, which was usually a length of highway. The owners and their staff were trained by the oil company in the methods of mixing the fuel. Owners and staff were asked to sign secrecy agreements. Stations could only sell the products made by or selected by or approved the oil company.
All these features and controls can form part of a franchise agreement today.
I said at the start of this section, that the oil companies were, arguably, the first franchisors. Some observers claim that the Coca-Cola Company was first. Coke offered the rights to dilute a concentrate and distribute product, in areas of the USA that they themselves didn’t cover. No fee was charged in the beginning so purists regard the arrangement as a simple distributorship agreement. Today there is no doubt that the Coca-Cola Company has the world’s biggest franchised manufacturing/distribution operation.
We all know McDonalds. You may not know that yesterday they opened a restaurant somewhere on earth every six hours. They will do so again today. McDonalds however is only the tiniest tip of the iceberg that is franchising. Indeed the business with the greatest number of franchised outlets is Subway Sandwich Restaurants with more than 25,000 units.
Around the world, millions of people earn their living every day directly or indirectly from involvement in franchising. Franchised distribution and foodservice operations are the fastest growing, in the history of the art of chaining. One new franchise opens for business, somewhere on Earth every two minutes.
Franchises now exist in almost every profession, trade and industry. From gynaecologists to undertakers. From florists to opticians. From engineering consultants to accountants. From railways to telephone companies – Sandwiches and pizzas just happen to be the best known.
Many of the best-known brand names in the World use franchising in whole or as part of their operations. Some are classical foodservice franchises like:
Baskin Robbins
BBs
Burger King
Coffee Republic
Harry Ramsden
KFC
McDonalds
Millies
O’Briens
Pizza Hut
Spud u Like
Wendys
Fast service ice cream and party cakes
Fast and table service coffee shops and restaurants
Fast service burger restaurants
Coffee shops and delis
Take away and table service fish restaurants
Fast service chicken restaurants
Fast service burger restaurants
Take away cookies
Fast service Irish coffee shops
Table service pizza restaurant
Fast service baked potato cafes
Fast service gourmet hamburger restaurants
Then there are the retail system franchises many of which are British but do not offer franchises in the UK:
Bhs
Burberry
Debenhams
Disney
Evens
JC Penny
Marks & Spencer
Monsoon
Next
Polo
Richards
River Island
Toys R Us
Warner Bros
Variety stores
Fashion
Department stores
Studio merchandise stores
Outsize ladies ware
Department stores
Department stores
Fashion
Fashion
Designer fashion
Fashion
Fashion
Toys and games
Studio merchandise stores
Next there are the services franchises - a sector growing even faster than foodservice.
AA
Autoglass
BSM
BT
Cadbury
Dairy Crest
Dr. Dent
Dyno Group
Ginsters
Holiday Inn
Home Tune
Kall Kwik
Prontaprint
RAC
Shell
Service delivery
Windscreen replacement
Driving tuition
Phone box cleaning and Phone Book delivery
Cart and workplace sales operations
Door-step milk delivery
Vehicle dent removal
Home and business services
Workplace foodservice
Hotels
Vehicle service
Print services
Print services
Service delivery and membership sales
Filling stations
Many companies use franchising when they want to expand the distribution of the product and where some local manufacturing, assembly or finishing is involved:
Adidas
Burberry
Coca Cola
Coors
Hewlett
Honda
Nike
Pepsico
Reebok
GD
Sony
Sporting goods
Fashion
Soft drinks
Beer
Packard Printers
Motorbikes
Sporting goods
Soft drinks
Sporting goods
Searle Sweetener
Electronic goods
Lastly there are the companies that use franchising as a means of selling their knowledge. The knowledge specialists sometime called technology transfer franchises include:
Air Lingus
BA
BAA
BNF
Dewhurst
DuPont
NHS
Nokia
Rolls Royce
SAS
Tesco
Whitehead
Duty Free operations
Airline operations
Airport operations
Nuclear power station operations
Textile processes
Chemical and textile processes
Health service operations
Cell phone software
Aircraft engine design systems
Foodservice
Supply chain methods
Hospitals
The companies shown above are just a tiny fraction of those involved in franchising and I have shown only those that are likely to be known in the UK, although not all offer franchises in the UK, or only offer segments of their business for franchise. Marks and Spencer for example franchise fashion only outside the UK, whist Simply Food is franchised in the UK but only in non-high street locations, such a transport termini and motorway service stations.
The reason that every day more and more people invest in franchises is very simple: Franchising works.
For more information, contact info@hostelfranchise.com or call +44 (0)207 232 4603 and we'll get right back to you.
The reason that every day more and more people invest in franchises is very simple: Franchising works.
For more information, contact info@hostelfranchise.com or call +44 (0)207 232 4603 and we'll get right back to you.
Follow us on:
