{"id":81,"date":"2018-09-28T15:45:22","date_gmt":"2018-09-28T15:45:22","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/suny-osintrobus\/?post_type=chapter&p=81"},"modified":"2018-09-28T15:45:22","modified_gmt":"2018-09-28T15:45:22","slug":"franchising-a-popular-trend","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-herkimer-osintrobus\/chapter\/franchising-a-popular-trend\/","title":{"raw":"Franchising: A Popular Trend","rendered":"Franchising: A Popular Trend"},"content":{"raw":"
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  1. What makes franchising an appropriate form of organization for some types of business, and why does it continue to grow in importance?<\/li>\r\n<\/ol>\r\n

    When Shep Bostin decided to buy a franchise, he researched the usual suspects: Jiffy Lube<\/span>, McDonald\u2019s<\/span>, and Quiznos<\/span> Subs. Bostin, then 38, was a top executive at a dying Gaithersburg, Maryland, technology firm, but instead of becoming another McDonald\u2019s<\/span> franchisee, Bostin chose to remain a geek, albeit one who wheeled around in the signature black PT Cruiser of Geeks On Call<\/span>, a company that provides on-site computer assistance via a large pool of experienced techies. Bostin made residential and commercial \u201chouse calls\u201d for more than a decade as a Geeks On Call<\/span> franchisee. There are approximately 123 independently owned and operated Geeks On Call<\/span> franchise territories in 50 states serving over 250,000 customers.[footnote]\u201cAbout Us,\u201d http:\/\/www.geeksoncall.com, accessed August 17, 2017; Megan Barnett, \u201cSize up a Ready-Made Business,\u201d U.S. News & World Report, August 2, 2004, p. 69.[\/footnote]<\/p>\r\n

    Choosing the right franchise can be challenging. Franchises come in all sizes and demand different skills and qualifications. And with somewhere around 2,500 different franchised businesses in the United States, Bostin had a lot to choose from\u2014from cookie-bouquet peddlers and dog trainers to acupuncture specialists. (Figure)<\/a><\/strong> shows the top franchises for 2017 from various sources. Entrepreneur\u2019s<\/span><\/em> rankings utilize among other factors costs\/fees, brand strength, support, and financial strength. Franchise Business Review<\/span><\/em> focuses on owner satisfaction, whereas Franchise Gator<\/span><\/em> utilizes a formula with factors such as financial stability and engagement.<\/p>\r\n\r\n

    \r\n\r\n[caption id=\"\" align=\"aligncenter\" width=\"1300\"]\"A Exhibit 4.5\u00a0<\/strong>Chance the Rapper was a big winner at the 2017 Grammy Awards. His win was also validation for a new business model. Chance the Rapper does not have a deal with a traditional record label but instead releases his music through streaming services. How might this approach benefit other aspiring music artists to gain footing and become a force in the music industry? (Credit: Julio Enriquez\/ Flickr\/ Attribution 2.0 Generic (CC BY 2.0))[\/caption]\r\n\r\n<\/div>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
    Table 4.5\u00a0<\/strong>Sources: \u201c2017 Franchise 500 Ranking, Franchise 500 2017,\u201d https:\/\/www.entrepreneur.com\/franchise500<\/em> (August 17, 2017); \u201cTop Franchise Opportunities for 2017,\u201d Franchise Business Review, https:\/\/topfranchises.franchisebusinessreview.com\/, (August 17, 2017); \u201cTop 100 Franchises of 2017,\u201d Franchise Gator, https:\/\/www.franchisegator.com\/lists\/top-100\/, (August 17, 2017).<\/caption>\r\n
    Top 10 Franchises for 2017<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
    Entrepreneur<\/em> Top 10<\/td>\r\n<\/tr>\r\n
    Franchise<\/strong><\/td>\r\nInitial investment<\/strong><\/td>\r\n<\/tr>\r\n
    1. 7-Eleven Inc.<\/td>\r\n$37K to $1.6M<\/td>\r\n<\/tr>\r\n
    2. McDonald\u2019s<\/td>\r\n$1M to $2.2M<\/td>\r\n<\/tr>\r\n
    3. Dunkin\u2019 Donuts<\/td>\r\n$229K to $1.7M<\/td>\r\n<\/tr>\r\n
    4. The UPS Store<\/td>\r\n$178K to $403K<\/td>\r\n<\/tr>\r\n
    5. Jimmy John\u2019s Gourmet Sandwiches<\/td>\r\n$330K to $558K<\/td>\r\n<\/tr>\r\n
    6. Dairy Queen<\/td>\r\n$1.1M to $1.9M<\/td>\r\n<\/tr>\r\n
    7. Ace Hardware Corp.<\/td>\r\n$273K to $1.6M<\/td>\r\n<\/tr>\r\n
    8. Wingstop Restaurant Inc.<\/td>\r\n$303K to $923K<\/td>\r\n<\/tr>\r\n
    9. Sport Clips<\/td>\r\n$189K to $355K<\/td>\r\n<\/tr>\r\n
    10. RE\/MAX LLC<\/td>\r\n$38K to $224K<\/td>\r\n<\/tr>\r\n
    Franchise Business Review<\/em> Top 10<\/td>\r\n<\/tr>\r\n
    Franchise Name\/ Industry<\/strong><\/td>\r\nMinimum Investment<\/strong><\/td>\r\n<\/tr>\r\n
    Visiting Angels (Senior care)<\/td>\r\n$77,985<\/td>\r\n<\/tr>\r\n
    MaidPro (Cleaning and maintenance)<\/td>\r\n$74,560<\/td>\r\n<\/tr>\r\n
    Pinot\u2019s Palette (Sports and recreation)<\/td>\r\n$63,400<\/td>\r\n<\/tr>\r\n
    Christian Brothers Automotive (Automotive)<\/td>\r\n$146,693<\/td>\r\n<\/tr>\r\n
    Home Instead Senior Care (Senior care)<\/td>\r\n$463,698<\/td>\r\n<\/tr>\r\n
    Our Town America (Advertising and Sales)<\/td>\r\n$115,000<\/td>\r\n<\/tr>\r\n
    FASTSIGNS (Business services)<\/td>\r\n$63,300<\/td>\r\n<\/tr>\r\n
    Sandler Training (Business services)<\/td>\r\n$182,329<\/td>\r\n<\/tr>\r\n
    Soccer Shots ((Child services)<\/td>\r\n$88,150<\/td>\r\n<\/tr>\r\n
    Two Men and a Truck (Services)<\/td>\r\n$36,000<\/td>\r\n<\/tr>\r\n
    Franchise Gator<\/em> Top 10<\/td>\r\n<\/tr>\r\n
    Franchise Name<\/strong><\/td>\r\nMinimum Cash Required<\/strong><\/td>\r\n<\/tr>\r\n
    Fast Signs<\/td>\r\n$100,000<\/td>\r\n<\/tr>\r\n
    Tropical Smoothie Cafe<\/td>\r\n$100,000<\/td>\r\n<\/tr>\r\n
    Marco\u2019s Pizza<\/td>\r\n$100,000<\/td>\r\n<\/tr>\r\n
    Zoup<\/td>\r\n$100,000<\/td>\r\n<\/tr>\r\n
    Mathnasium<\/td>\r\n$100,000<\/td>\r\n<\/tr>\r\n
    Christian Brothers Automotive<\/td>\r\n$80,000<\/td>\r\n<\/tr>\r\n
    Two Men and a Truck<\/td>\r\n$150,000<\/td>\r\n<\/tr>\r\n
    Kiddie Academy<\/td>\r\n$200,000<\/td>\r\n<\/tr>\r\n
    Wild Birds Unlimited<\/td>\r\n$40,000<\/td>\r\n<\/tr>\r\n
    SportClips<\/td>\r\n$200,000<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n

    Chances are you recognize some of the names listed in (Figure)<\/a><\/strong> and deal with franchise systems in your neighborhood every day. When you have lunch at Taco Bell<\/strong> or Jamba Juice<\/span>, make copies at FedEx<\/span> Office, change your oil at Jiffy Lube<\/span>, buy candles at Wicks \u2019n\u2019 Sticks<\/span>, or mail a package at The UPS<\/span> Store, you are dealing with a franchised business. These and other familiar name brands mean quality, consistency, and value to consumers. Franchised businesses provided about 8.9 million direct jobs with a $890 billion economic output for the U.S. economy.[footnote]\u201cThe Economic Impact of Franchised Businesses in the United States,\u201d International Franchise Association, http:\/\/www.franchise.org; \"FAQs about Franchising.\" FAQs about Franchising | International Franchise Association, (August 17, 2017).[\/footnote]<\/p>\r\n

    Franchising<\/strong> is a form of business organization that involves a franchisor<\/strong>, the company supplying the product or service concept, and the franchisee<\/strong>, the individual or company selling the goods or services in a certain geographic area. The franchisee buys a package that includes a proven product or service, proven operating methods, and training in managing the business. Offering a way to own a business without starting it from scratch and to expand operations quickly into new geographic areas with limited capital investment, franchising is one of the fastest growing segments of the economy. If you are interested in franchising, food companies represent the largest number of franchises.<\/p>\r\n

    A franchise agreement<\/strong> is a contract that allows the franchisee to use the franchisor\u2019s business name, trademark, and logo. The agreement also outlines rules for running the franchise, services provided by the franchisor, and financial terms. The franchisee agrees to follow the franchisor\u2019s operating rules by keeping inventory at certain levels, buying a standard equipment package, keeping up sales and service levels, taking part in franchisor promotions, and maintaining a relationship with the franchisor. In return, the franchisor provides the use of a proven company name and symbols, help in finding a site, building plans, guidance and training, management assistance, managerial and accounting systems and procedures, employee training, wholesale prices for supplies, and financial assistance.<\/p>\r\n\r\n

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    Advantages of Franchises<\/h3>\r\n

    Like other forms of business organization, franchising offers some distinct advantages:<\/p>\r\n\r\n