Franchise
A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business knowledge, processes, and trademarks, thus allowing the franchisee to sell a product or service under the franchisor's business name. In exchange for acquiring a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual licensing fees.
Definition: Franchising is a license that grants the franchisee the right to use the franchisor's proprietary business knowledge, processes, and trademarks, allowing the franchisee to sell products or services under the franchisor's business name. In exchange for obtaining the franchise, the franchisee typically pays an initial setup fee and annual licensing fees to the franchisor.
Origin: The concept of franchising can be traced back to the Middle Ages when kings and nobles granted certain commercial privileges to specific individuals or groups. The modern franchising model became popular in the early 20th century, especially in the United States. One of the earliest modern franchising cases was automobile dealerships and gas stations in the 1920s.
Categories and Characteristics: Franchising mainly falls into two categories: product distribution franchising and business format franchising.
- Product Distribution Franchising: The franchisee primarily sells the franchisor's products, such as automobile dealerships and gas stations. In this model, franchisees usually have more autonomy.
- Business Format Franchising: The franchisee not only sells the franchisor's products or services but also uses its business model and operational processes, such as McDonald's and Starbucks. In this model, franchisees need to strictly follow the franchisor's standards and procedures.
Case Studies:
- McDonald's: McDonald's is one of the most well-known franchising brands globally. Through the franchising model, McDonald's has rapidly expanded worldwide. Franchisees need to pay an initial fee and ongoing franchising fees and must strictly adhere to McDonald's operational standards.
- 7-Eleven: 7-Eleven convenience stores are another successful franchising case. Franchisees gain the right to operate convenience stores globally by paying an initial fee and ongoing franchising fees, using the 7-Eleven brand and business model.
Common Questions:
- What fees do franchisees need to pay? Franchisees typically need to pay an initial setup fee and annual licensing fees. Additionally, they may need to pay advertising fees and training fees.
- Do franchisees have autonomy? The autonomy of franchisees depends on the type of franchising. Product distribution franchising usually offers more autonomy, while business format franchising requires strict adherence to the franchisor's standards and procedures.
