Franchising

Welcome to this session on franchising, an increasingly important channel of distribution in today's global marketplace. Franchising is a partnership where an organization called the franchisee, provides a proven business package centered on a product or service through a contract with franchisees. These franchisees usually independently owned small businesses operate under the franchise or's trade name and prescribed model. In exchange, the franchisee pays an upfront fee and ongoing royalties. Franchising appeals by balancing entrepreneurial independence with the support of an established system, enabling rapid brand expansion without direct oversight by the franchise. Within franchising, two main forms are recognized product distribution and business format franchising. Product distribution focuses on selling a specific product like car dealerships or beverage bottlers, while business format franchising, common in hospitality and retail, offers a full business system. The franchisee provides the brand, manuals, and ongoing support, and the franchisee manages daily operations. Internationally, companies may use direct franchising, area development, or master franchising. Governance choices impact control and resource needs. Master franchising allows quick capital light expansion, but less direct control. Companies franchise to overcome resource constraints like limited capital or managerial capacity, and to leverage local entrepreneurs to grow the brand.