BUSINESS INVESTING THROUGH FRANCHISE

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1 BUSINESS INVESTING THROUGH FRANCHISE INTERNATIONAL BUSINESS THESIS SAMPLE

2 This paper gives an overview of a franchise business, along with basic features, types, and franchise financing. Franchise is the best way to start a business, if there is any doubt about personal capabilities and abilities. Franchise is a business strategy of companies of different sizes, that is, large societies are becoming even bigger and the small ones in this way develop and strengthen. Franchise is a business strategy that provides good results to all who participate in this business relationship, both to the franchise provider and to the franchise recipient. The fundamental goal is the success of the franchise and it is therefore important to prepare well for the recipient to take the franchise. The advantage of this type of business is to bring security to success and earnings, as opposed to the independent opening up of a business or business, is ideal for people who do not have enough security to start their own business but also for those who are just entering business because they rely on this to existing successful business models. The largest number of franchisors do not seek the experience of certain jobs. Business performance depends on the product or service, a wellestablished business model, a good organization of business operations and a marketing approach, and a franchisee's business. There are several terms with the franchise, and an explanation of some of the most common is given below. The word franchising comes from the French word "franchir" which means "liberating" and originally meant to be rid of slavery. Today, there are several meanings depending on the branch of business, and the most common definition of franchise is, according to the definition of the International Franchise Association: Franchism represents a lasting relationship between a franchisee and a franchisee in which the total sum of Franchisor's knowledge, image, success, production and marketing techniques. In fact, it is a contract between the seller and the buyer who allows the franchisee to sell the products or services of the seller (franchisee) and uses his brand and logo. The very essence of franchising is that a franchisee or franchisor from a franchisee or a seller of a product or service already receives an almost probable copy of all the others in the franchise chain, and also expert assistance such as marketing strategy, initial employee training and management, layout of premises and their equipment, standardized business policy and procedures, centralized procurement with savings, location selection and advice, lease negotiations, financing.

3 The franchise provider / franchisor (legal entity, less common physical) is the owner of the brand, the manufacturer of a new or attractive product and / or service, of the developed and / or original marketing techniques that the franchisor gives to the business under a common name and in accordance with the same terms of work for all companies within the same organization. Franchisees are mostly large international companies, and possessing these categories (products, services and management skills) allows them to realize international expansion, increase profits and become international renowned companies in a relatively short time and with little investment. The franchise system is most widely used in the production and distribution of non-alcoholic beverages, fast food, hotel services, various intermediary services, car rental, cigarette manufacturing. The franchise taker / franchisee accepts the obligation to perform work under well-known and well-established terms and under the name and promotion that is common to all companies in the chain. In some cases, the franchisee adapts the traditional business to new conditions, i.e. enters a whole new area of business in an attempt to secure the job and the profitability of the investment. Franchise users, although in most cases small and medium-sized enterprises with low financial resources, provide knowledge of the local market, part of the capital and staff. Cost or royalties is the amount that is usually calculated in percent of the gross turnover and is paid periodically. Royalties serves the franchisor to pay all the costs he has for: technical assistance, management assistance, constant consulting (consulting), periodic seminars, counseling etc. The most significant features of the franchise are: - A contractual relationship between a partner under which one of them (the franchisor) authorizes (licenses) another partner (franchisee) to operate under his name and uses his brand and uses the products, which is related to the provider of the franchise, - The franchisor supervises the way the franchisee receives business, - Assistance to the franchisor by the franchisor, - Separate business, i.e. the franchisor invests, thus exposing the risk to own capital There are different definitions of franchise.

4 One of them is a franchise business with a system of trading of goods and / or services and / or technology based on the close and constant co-operation between legally and financially independent franchisees and its franchisees (partners) where the owner guarantees their customers the right and imposes the obligation to lead a business in accordance with the franchise concept. The history of the franchise originates in the distant past, and the roots are mentioned even in feudalism. There are two theories, both from the 19th century, for the beginning of modern commercial franchism. For one, the first commercial franchise was the Singer Sewing Center, which was originally Isaac Singer in 1858, and related to the sale of rights to local business people who sold Singer's machines and trained users. Income from licenses helped him grow in the company and finance the production because each franchise herself financed, so she was paid some expenses such as the cost of recruiting center managers. Some franchise model industries later copied, and Coca-Cola is best known. Coca - Cola managed to expand at the national level, so it moved production, storage and distribution to local business people who got the right recharge. In return, they had to take over the risk at the local one level and provide capital for expansion and get exclusive marketing and distribution rights. By the second theory, a commercial franchise is developing a little later, i.e. 1898, when General Motors begins to franchise dealerships. This franchise system still works well today and employs about 10,900 retailers across the country. Looking at the first 100 years of commercial franchise, some interesting things to note are that the franchisor did not control the look of the franchise, so the users themselves created their own business style. Gas stations, car dealers, motels, did not have the same look and even the same service although they had a common trade name. Different types of franchisees have also evolved through the development of franchise business. Initially there is a division into two basic forms: franchises of a product or a franchise (a franchisee gives the recipient the right to a name or a trademark) and a franchise business format (includes a wider range of services, location selection, employee training, product procurement, marketing plan). The breakdown is as follows: - Franchise distribution, product distribution franchises; - Business format franchises; - Conversion franchise.

5 Franchise of product distribution is a classic form of franchising, and cooperation is based on a vertical link that replaces capital linkage. The franchisor produces the product, and the recipient of that finished product is selling it. The most famous industry which applies this type of franchise are: the refreshing drinks industry, the automotive and ancillary products industries and the petrol industry. Products sold through this franchise require, prior to sale, a franchise recipient of some preparatory work. Particularity is that the franchisor licensed its trade name and logo to the franchisee but does not provide a business system. Franchising a business format to a franchisee, using a trade name and provider's log, allows the benefit from a complete system for delivering products or services and for business. This form of franchise is the fastest growing form and is increasingly organized by this franchise. The benefit is mutual, both for the recipient and for the franchisor. The recipient of the franchise, pays a fee and royalty and thus gives the franchise system an uninterrupted source of capital for further growth and development of the organization. In return, the recipient of the franchise gets an in-house job, greater market competition because of the well-known inside and marketing support. The feature of this franchise is the consistency that secures the success of this franchise and strives for every well-run franchise system. The franchise provider provides information on how and where to order the required products, how to prepare them and how to present them to customers. The business package also consists of licenses, trademarks, know-how, a special image developed by the provider in his business and which has made it successful, providing expert assistance, and conducting business control by the franchisor. Franchise systems do not prescribe an equal level of control and consistency, but most systems have standards that ensure a minimum level of business. This means that whatever the owner of the franchisee or receiver is, every location, no matter where it is in the world, looks the same and has the same ambience, and in the restaurants it is the same as the taste of food. As an example of a franchise business format can be stated: Subway, McDonald's, Burger King.

6 REFERENCES Welsh, D. H. B., & Desplaces, D. E., & Davis, A. E. (2011). A Comparison of Retail Franchises, Independent Businesses, and Purchased Existing Independent Business Startups: Lessons from the Kauffman Firm Survey, Journal of Marketing Channels, 18 (1), Hoy, F., Stanworth, J., Purdy, D., Sexton, D., & Landstrom, L. (eds) (2000) An Entrepreneurial Slant to Franchise Research. The Blackwell Handbook of Entrepreneurship. Oxford, UK: Blackwell Business. Knight, R. M. (1984). The Independence of the Franchiser Entrepreneur. Journal of Small Business Management 22 (2),