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Write 5 pages thesis on the topic franchise business. The history of franchising dates back to the 1850s when an American entrepreneur Isaac Singer the inventor of the sewing machine chose to sell lic
Write 5 pages thesis on the topic franchise business. The history of franchising dates back to the 1850s when an American entrepreneur Isaac Singer the inventor of the sewing machine chose to sell licenses to other entrepreneurs in different parts of the country. This idea was prompted by the fact that his company staff could not provide sufficient training to the customers who bought his product (Sherman, 2011).
In 1960, Ray Kroc, an American fast food businessman after taking over small chains of food companies laid strong foundations for one of the most successful food franchises in the world. Due to globalization and the reduction of barriers to international trade like tariffs, many firms driven by the need to increase the production of goods and services have used franchising as a perfect tool to market their products in other countries outside the place of incorporation (Sherman). Multinational companies like Coca-Cola, a producer of drinks and leading firms in the automobile industry like Toyota are operating in almost every part of the world through franchising.
Justification of the business
In the 20th century, most of the world’s economies followed expansionary paths, with many firms finding a solution to increase their customer base in operating businesses in foreign countries. During this period, most countries had an exponential increase in population growth rates that necessitated accommodating foreign firms in an economy for this would spur employment opportunities (Hammond, 2011).
Businesses that are run of franchising rails stand a chance of excelling because the products, as well as services brought in the market place, have been established by the franchisor and the setbacks in launching a new product were dealt with originally. Again, a proven business formula has been put in place for marketing the product, and the franchisee’s business will not need extra time to pick momentum in the new market place. For businessmen and women, trading with already tested products offers income (Hiam, 2007).
Nature of the business
This franchising business is global, whereby the multinational has a registered head office in the country of incorporation. Coca-Cola Limited is an example of a franchise which has its head office in New York, U.S.A. being, spread to almost every country in almost every continent, each country has a registered head office where the major policies and administrative functions are carried out from. At a country level, Coca-Cola Limited after assessing the market potential of its products and analyzing the annual demand of its drinks will enter into an agreement with potential business firms to aid in the production and distribution of its products to the entire nation. Other business operations like carrying out market research, mobilizing the locally available raw materials will thus be made easy through this arrangement. In return, the business firm turned franchise will generate income from the sale of the drinks to the local customers. The business turns them to their ‘own boss’ since they now operate their own firms.
On the same note, Coca-Cola Limited will lay down the procedures and rules that are to be followed by the successful franchises to carry out the business (Nash, 2000). This will make the franchises from violating Coca-Cola’s policy which may damage the reputation of their products. Coordination between the franchisor and the franchisee is carried out to ensure that the products that enter the market place are of superior quality.
