Franchising

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CHAPTER ONE INTRODUCTION

INTRODUCTION

Franchising has become one of the most recognizable business formats and an internationalization strategy for business practitioners globally and also in the United Kingdom especially in the way entrepreneurs are operating under other people’s business concept. It has emerged over the years as a popular expansion strategy for a variety of product and service companies.

This research critically examines how franchising play vital role in retail business growth and expansion in the food industry, using the Strand Mc Donald’s as a case study. The research looks at the importance of franchising, and will be very informative for organizations and stakeholders directly and indirectly involves in franchising business.

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This chapter looks at the research background, organization background, the research problem, the aim and objectives of the study, the scope and limitations, brief introduction of the study area and the structure of the research.

RESEARCH BACKGROUND

Franchising is basically a specialized form of licensing in which the franchisor not only leases intangible property (normally a trademark) to the franchisee but also insists that the franchisee agree to abide by strict rules as to how it does business. The franchisor will often assist the franchisee to run the business on an ongoing basis, (Hill 2008.pp 408). It is similar to licensing, although franchising tends to involve longer term commitments than licensing.

Franchising is a method of distributing products or services. At least two levels of people are involved in a franchise agreement, namely: the Franchisor, who lends his trade mark or trade name and a business system; and the Franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system of operations, technically, the contract binding the two parties is the franchise. Franchising has emerged in recent years as a highly significant strategy for business growth, job creation, and economic development at both local and international retail business arena, (Hoffman& Prebble, 1995.p 80). It has moved from traditional product (trade mark) areas such as automobiles, petroleum and soft -drink bottlers to be a more proven format business concept.

Over 80% of Mc Donald restaurants worldwide are owned and operated by local businessmen and women. They adapted Ray Kroc’s franchising business strategy of providing high standard of quality, friendly services, cleanliness and value, (QSCV). Also in the hotel industry, companies such as Marriott, Holiday Inn, Hilton and Accor have employed franchising as their primary growth strategy globally.

Of course, the most well known restaurant franchise in the worlds is McDonalds. So much has been written about Ray Kroc and the McDonalds’ brothers that McDonalds and Crock have become an institution. The first McDonalds were opened in Des Plaines, Illinois, in 1955 and soon afterward,

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