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A franchising agreement allows an independent organisation in order to expand the business, called the franchisee, operate a business under the name of another, called the franchisor".
Over the last five decades, franchising has emerged as a leading intellectual property leveraging strategy for a variety of product and service companies at various stages of development . There are so many companies prematurely select franchising in the establishment of business and then haphazardly assemble and develop the franchisee program .Other companies are connected to franchise by unqualified and untrained consultants or advisor who may perhaps more taking ineterst in professional fees than in the long-term success of the franchising program. And still others move too quickly in the establishment of their franchising program without devoting the time and resources to development of an effective and viable business and economic model. This has caused financial distress and failure at both the franchisor and franchisee level and normally results in distraction in the busniness. Present and future members of the franchising organisation have a job to take a responsibility to view towards the creation and establishment to their franchising development.
International franchising program,
Just as the increasing in the popularity of franchising has taking the attention of US economy. It also attracting original attention in the overseas markets and is likely to be a major trend in the future. For example, United states-based franchisor are now operating in more than 160 countries worldwide and so many overseas franchisors have successfully penetrated the US market as well as many others markets beyond their domestic roots.
The common method of international franchising is normally used when the company wants to explore its busniness in the global market and when company has some valueable intellectuall property and method and the company belieives that they can use it in the international level, across the boundries. Additionally it use when the company looking for development and it is stronger in the development of products and than in the international skills necessary to market the product in other economic and or cultural atmosphere.
For a company to consider using the franchise method, it should following the internal company chrateristics
The company does not have the resources or desire to invest heavily in the in overseas market.
The company trying to develop and rejected, the distributor method
The company has determined that traditional licensing will not work.
The company usually do their business through franchises in its home country, and has developed the appropriate methods and using different techniques.
Market characteristics may helps in the development and also determine weather to franchise. Franchisor of self-services and laundries are cleaners perhaps not be able to compete in other countries, where labor saving devices and time saving are unnecessary due to the availability and low cost of labor. Finally legal and financial consideration must be examined. Some countries having a very strict laws in order to make a franchise like USA and European countries, but Canada has no legislation. Financial includes the problems of obtaining royalties and other payments from soft currency countries, and a greater financial exposure. And ,may be poor franchisor have to be taken over by the franchisor, which would than be forced in the new country where it had no desire to make direct investments.( Global business) 308 tips to take your company worldwide, by Lawrence e koslow , Robert .h. scarlett.
When looking for an interenational expansion of business program, franchisors also have an idea about these important idea,
LANGUAGE BARIERS, international franchising is the part of operations and about the language barriers in may be seem simple enough at th outset to translate the operations manual into the local language.
TAST BARRIERS, in order to develop the taste of the local country to the worldwide, franchising is the best way, and this is the great challenge is how to modify the particulars without losing the essence of the core product or services.
MARKETING BARRIERS, These types of barriers straight way going to the deep thoughts of marketing culture of different countries where the franchising wanted to develop. These cultural norms can be affected by the factors such as the cost and availability and retail place. For example, the mcdonalds in some countries are luxury. Only the rich people can afford these kinds fast foods.
Legal barriers, there some countries , where the laws are very strict in term of franchising such as USA and European countries. Domestic legislation may not be recomonded to the establishment of franchising and distributing arrangements.
Business formation, the interenational structure must be of franchising in way of transaction must be determined such as foreign corporations, area developer, single unit perators and joint ventures.
Choice territory, whenever doing franchising to the different countries, the major cities are very important in order to understand the marketing of business. This may well effect the sales, distribution, and the ability to expand at a later point in time.
Intellectuall property and quality control, protection of trade marks, atrade names and services marks are remarkable, especially for a domestic franchising. Licensing of intellectual property overseas.
Local laws, domestic legislation need to be understand in order to franchising. The issues arising under law , immigration law, custom law, tax law and agency law. The need for import licenses and work permits will also need to considered.
Source of financing, the finance is the major undertaken, in order to choose territory it clearly affect the ability of sales and distribution. So if more investment on the territory may well effect on the sales and marketing.
Expatriation of profit, this can be the most decisive factor in deciding whether to enter a given market or not. If the franchisor having restriction in the ability to convert and remove earned money and loyalties from a foreign jurisdiction, then the profit of entering marketing perhaps completely eliminated.
TAXES, the strategies of taxes are different in every country. So the laws of home country and the country where the business is going start, completely different, and it also well affect on market sales as well.
Naturally, these are not just a opportunities it also taking challenges in the business and really needs different strategies to use for different kinds of purposes. For example the worlds leading and famous franchisor's Mcdonalds. The mcdonalds franchising almost available in every country and most success they are on the way of business. Few days ago mcdonalds corporation opened in Iceland and they also build underground parking in that franchise. And ofcourse this is the great attraction for the customers of that country. But they opened in Israel and unfortunately they to be a success because of the proper stain of the potatos for its French fries. And they are fighting with there minisitry for the last few months . As we say mcdonalds is the most successfull franchisor in whole world . they were surviving in the different market , but now they are thriving in the international market even under the recession of the global world. And the mcdonalds worlds leading franchisor who has introduced first time nutrition food and with healthy foods like salads and others. (www.franchisedirect.com).
Attraction of international franchising,
The franchisors always attract to each whenever they got the profits and cultural influence, of the country where they doing business. Through franchising business can be explore in the global market and got the opportunity to grow the business, and the new franchisee should adoubt some critical hurdles of that country where the franchise going to develop,
the cultural adaptation is the main entrance in the foregn country, and it culd well affect on the business profit and its sales performance. The franchisee can do this through hiring the local staff and use them as an assets.
Franchising is the common method of business expansion in the international market . and franchising is not an business purposes, it also explore the home country culture if the food and product are likely to sell in the country where the franchising has been established.
Market corner means , the company should open there franchise in the country where the product their services are most demanding, this could help to make a corner in that country.
It also change the business lifestyle if the franchise moving to the hot weather from the cold weather.
Growth of the business,
It has also give an opportunity for th growth. Like if the business slow in the home country, the franchise should be open in the that country where the trend of exhibition. So that they can get the advantage of growth through exhibition. Such as UAE and AMERICA.(www.ehow.com).
No,doubt franchising is the source business exposure. This is the right way to explore the busness and make it successful as possible. Its necessary to understand the method of international franchising by the franchisor to expand the business in order to get the competitive advantage in global market by selling there products, foods , travels , trade and so on. The franchisor also need too understand the culture, traditions. Customs laws and ofcourse taste of food if the franchise is about food service.