Franchising M1-M2 Reviewer PDF

MODULE 1 Licensing relationship – A franchisor of a product, Conversion franchising is the process of turning service, or business method grants distribution rights independent businesses into franchisees under the to affiliated...

MODULE 1 Licensing relationship – A franchisor of a product, Conversion franchising is the process of turning service, or business method grants distribution rights independent businesses into franchisees under the to affiliated dealers (the franchisees); these rights umbrella of the franchisor brand name. often include exclusive access to a defined geographic franchise is a type of license that grants a franchisee area. access to a franchisor proprietary business Continuing relationship – A franchisor provides a knowledge, processes, and trademarks, thus allowing licensed privilege to do business and provides the franchisee to sell a product or service under the franchisor business name. management and technical assistance and training in return for a consideration from the franchisee. Franchisor is the individual or business granting the business rights to a franchisee. A person who started TYPES OF FRANCHISES a business that become so successful. 1. JOB FRANCHISE - Typically, this is a home-based or low investment franchise that is taken by a person Franchisee is the individual or business granted the who wants to start and run a small franchised right by the franchisor to operate in accordance with business alone. Franchisee usually has to purchase the chosen method to produce or sell the product or minimal equipment, limited stock and sometimes a service. A person who purchases a successful vehicle. franchise from a business owner. Franchising is a method of doing business by which a 2. PRODUCT (OR DISTRIBUTION) FRANCHISE/ franchisee is granted the right to engage in offering, PRODUCT AND TRADE NAME FRANCHISING - a selling, or distributing goods or services under a franchising relationship in which the dealer acquires marketing format which is designed by the franchisor. the trade name, trademark, and/or product from the franchisor/supplier. Product-driven franchises are 3 major components of the franchise opportunity: based on supplier-dealer relationships, where franchisee distributes the franchisor’s products. 1. A trademark or logo 2. The use of a product or service following the 3. BUSINESS FORMAT FRANCHISE - Involves a specific marketing plan FORMAT or approach required by the franchisor of 3. A payment or royalty fee the franchisee to following when providing the products and/or services to the customer. Ways of Describing Franchising Business Opportunity - the owner (producer or 4. INVESTMENT FRANCHISE -Typically, these are large distributor) of a service or a trademarked product scale projects which require a large capital investment, such as hotels and the larger restaurants. grants exclusive rights to an individual for local distribution and/or sale of the service or product, and 5. CONVERSION FRANCHISE - is a modification of in return receives a payment or royalty and standard franchise relationships. Many franchise conformance to quality standards. systems grow by converting independent businesses in the same industry into franchise units. Pattern or method of doing business - a franchisee is granted the right to offer, sell, or distribute goods or The earliest franchising in the U.S. is the McCormick services under a marketing format which is designed Harvesting Machine Company, which in 1850 commissioned “exclusive local agents” to sell and by the franchisor. service its machinery. Franchise opportunity – 3 components, a trademark The first consumer goods firm to use a franchise- or logo, the use of product or service following a oriented system of distribution was the Singer Sewing Machine Company. During the 1850s, Singer marketing plan, and a payment or royalty fee. experienced difficulty in marketing its new product. Format: the approach to be used by a franchisee in Because the sewing machine was an innovative providing the franchisor’s product or service line to product. the customer. A joint venture franchise is shorthand for the grant of Top 20 Global Franchises 2023 – KFC a franchise to a joint venture party. Top 10 Best Franchise in the Philippines 2022-23 1. Jollibee Foods Corp (JFC) (FRANCHISING) ADVANTAGES TO THE FRANCHISEE 2. McDonald’s 1. Established Product or Service. 3. A Gasoline / Petrol Stations 2. Technical and Managerial Assistance. 3. Quality Control Standards. Different types of Franchise Business 4. Less Operating Capital. 1. Restaurants: The restaurant industry is one of the 5. Opportunities for Growth. most dynamic segments of franchising. 2. Hotels, Motels and Campgrounds - Quality Inns, (FRANCHISING)DISADVANTAGES TO THEFRANCHISEE Holiday Inns and Marriott Hotels. 1. Failed Expectations 3. Recreation, Entertainment and Travel - Included in 2. Service Costs this groups are travel agencies, miniature golf courses, 3. Overdependence movie theaters and dance studios. 4. Restrictions of Freedom of Ownership 4. Automotive Products and Services - Franchise firms 5. Termination of Agreement specializing in muffler replacements, lube jobs, oil changes and transmission repair have been able to (FRANCHISING) ADVANTAGES TO THE FRANCHISOR provide good and efficient services while charging less 1. Expansion than independent dealers. 2. Motivation 5. Business Aids and Services - This includes 3. Operation of Nonunion Business accounting and financial planning firms, businesses 4. Bulk Purchasing and services, consulting and brokerages, education 5. Cooperative advertising and training, gifts and fund-raising specialists. 6. Printing, Copying, and Sign Products and Services - (FRANCHISING)DISADVANTAGES TO THE FRANCHISOR This category of franchisors has the highest ratio of 1. Company-Owned versus Franchised Units. franchisors who make earning claims. 2. Potential problem of Recruitment 7. Employment and Personnel Services - This category 3. Potential problem of Communication has the highest ratio of franchisors that require the 4. Loss of Freedom franchisee be an owner-operator of the business. 8. Maintenance and Cleaning Services - Examples of A trademark is a symbol of a product or service and franchised opportunities in this category are Carpet the level of quality provided by the owner of the mark and Upholstery Cleaning, Building Care, and (franchisor) and its licensee (franchisee). Restoration Services. 9. Construction and Home Improvement. Three kinds of trademarks: 10. Convenience Stores - Franchise agreements for 1. Coined trademarks - The strongest kind of mark is a convenience stores are typically written for ten-year coined or made-up word that has no meaning other terms and large majority require that the franchise be than as a trademark. Consists of a combination of the owner- operator. letters, it is an invented word. Example – Business-Opportunity Approach: an informal generic Kodak,Xerox,exxon description about the franchisor-franchisee 2. Suggestive trademarks - is a distinctive, but not relationship, wherein an owner of a product or service descriptive, mark which does not describe a product, grants right to an individual for local distribution but suggests or references it, requiring consumers to and/or sales of the goods or services who, in return, exercise imagination to connect the mark with the provides a fee or royalty back to the owner. product. Example – 7- Eleven (food store chain), Business week (magazine), Mustang (car). 3. Descriptive trademarks – are considered to be the Operating Franchise - an owner-operator run weakest type of legal trademark and can be difficult franchise business usually with an exclusive territory to protect. It describes the product or service that is who usually does not have the right to establish sub- sold. Example – Holiday Inn (motel chain), Vision franchisees or licensees. center (eyeglass and optical clinic), Outback Territorial Franchise -a franchisee is guaranteed by steakhouse (restaurant chain). the franchisor that no competition will come from the same franchisor within a specified geographic SEVEN STEPS FOR FRANCHISE PROTECTION boundary. The franchisee may have opportunity for The Franchise Opportunities Handbook, developed establishing additional franchised units within the and distributed by the U.S. Department of Commerce, stated territorial boundary. suggest seven areas of protection for the prospective franchisee to consider before investing in a franchise. THE STRUCTURE OF A FRANCHISE BUSINESS PLAN- 1. Protect yourself by self-evaluation There is no ‘one size fits all’ approach to structuring 2. Protect yourself by investigating the franchise your franchise business plan. 3. Protect yourself by studying the disclosure document FRANCHISE FEASIBILITY STUDY The first step in 4. Protect yourself by checking out the disclosures establishing a comprehensive integrated franchise 5. Protect yourself by questioning earnings claims plan is to determine the feasibility of developing an 6. Protect yourself by obtaining professional advice existing business into a franchise operation. 7. Protect yourself by knowing your legal rights A properly developed franchisor plan will have three The Capital Requirements or concerns of a franchisee major components or packages can be enumerated in the following six categories: (1) Franchisor Business Plan 1. Franchising fee - (also called the “initial franchise A franchisor business plan should include a detailed fee”) is the payment made by a franchisee to the blueprint of operations. franchisor for joining the franchise system. Management, organization,and administrative 2. Real estate or rental costs, including building costs policy. 3. Personal living and travel costs Managing the marketing process. 4. Equipment costs Sales and marketing research. 5. Startup expenses and inventory Managing the operations process. 6. Working capital Location and site selection. Management information systems. FRANCHISOR AND FRANCHISEE RELATIONSHIP (2) Franchisee Recruitment Package THREE TYPES OF RELATIONSHIPS Include disclosure documents, recruitment and 1. Legal Agreement between the franchisor and advertising brochures, and franchising agreements franchisee – Requires certain activities and and contracts. The recruitment package is designed to responsibilities from each party based on the show to a prospective franchisee what the franchisor franchisee agreement/contract. has to offer and should contain clear statements 2. Business Relationship – Can be compared to about expectations and responsibilities of each party - “marriage”, basic understanding between parties franchisor and franchisee. exists to meet the public’s needs while relying on one (3) Franchisee Operations and Success Package another to provide the best products or services to Generally, contains elements of the following items: the customer as possible. operations manual, financial and bookkeeping 3. Independent Business Owners/Operators – A systems, advertising and promotional packages, sales franchisor and a franchisee each acting individually for manuals, the franchisor or franchisee support their own best interest. After all, each is a separate package, and the training manual. The operations business. manual is often identified by the franchisee as the “bible of the business”. It describes in detailed each KEY TERMS function and sub function with procedural guidelines franchise venture and sparks the interest of any and standards for operating the business. outsiders. 2. Marketing segment - The marketing process Disclosure document should be given to a prospective concerns the distribution of goods and services to franchisee at the first personal meeting between the existing and potential customers to satisfy some want prospect and the franchisor, or 10 – 14 days prior to or need. the execution of a contract. eight elements are included in the marketing section A. Major marketing objectives Franchise brochure is simply a typewritten or printed B. Market plan and pricing strategy booklet provided to a prospective franchisee that has C. Franchisee recruitment plan and flowchart responded to the franchisor’s advertisement or seeks D. Franchisee Prospectus information based on a word-of-mouth inquiry. E. Franchisee Sales and Advertising F. Franchisee location criteria A Financial and bookkeeping system is generally G. Grand opening developed by the franchisor and explained to the H. Customer Advertising franchisee to know each reporting form required by the franchisor as well as any approaches to financial 3. Management segment - can be simply defined as analysis. getting things done through people. The Advertising, promotion and sales program The Management section five elements: typically address the amount of advertising and A. Headquarters promotional support available prior to and at the time B. Franchisee organization of a grand opening, cooperative advertising C. Operations manual arrangements between franchisor and franchisee. D. Training manual The franchisor support package is a rather nebulous E. PERT chart term that typically refers to the measures franchisors adopt to maintain wholesome relationships between 4. Finance, accounting and taxes- These records can themselves and their franchisee(s). be valuable tools for assistance in making effective Training manuals need to be prepared so that not management decisions. only can franchisees be trained but also future The major accounting records to be kept by the employees within the franchised unit. Franchisor and the Franchisee: FEASIBILITY STUDY should contain sufficient 1. Start-up or turnkey costs information to enable either a franchisor or a 2. Financial position for starting franchisor’s system franchisee to make go or no go” decision. 3. Balance Sales promotion is associated with specific time 4. Income statement related efforts to improve sales of a specific product, 5. Cash flow statement line of products, or services. 6. Breakeven analysis Advertising is often institutional in orientation 7. Ratio analysis promoting the franchise itself as opposed to offering a 5. Legal requirements - Certain legal requirements of specific product at a promotional price. a franchised operation must be satisfied. UNIFORM FRANCHISE OFFERING CIRCULAR (UFOC): a Typical factors covered in the legal agreement disclosure document outlining business activities include: which the Federal Trade Commission (FTC) requires 1. Business Structure from all franchisors. 2. Licenses, contracts, and permits 3. Types and anticipated costs of insurance Six content sections of the Franchising Feasibility 4. Disclosure documents (Uniform Franchise Offering Study Circular) 1. Executive summary- The most crucial part of any 5. The franchising agreement itself business plan because it tells the story of the 6. Conditions integral to the Franchisor- 7. Possible termination. 6. Appendix - The appendix is an important visual aid, TEN COMMANDMENTS OF A SUCCESSFUL BUSINESS containing illustrations, diagrams, analyses, and Jim Peterson, chairman, CEO and president of exhibits referenced throughout the franchise Bojangles’ Restaurants Inc. has developed the ten feasibility study. commandments of running a successful business. These ten points are as follows: Three levels of administration including strategic, 1. Leadership administrative and operations development. 2. Staying with the business one understands Strategic development – focused around the vision 3. Developing and maintaining a unique niche of the franchisor, plus the products and services that 4. Keeping firsthand touch with the customer the franchisor will provide. This may sound easy but is 5. Relentless pursuit of management principles and probably the most difficult of all the franchisor’s task. fundamentals Administrative development – Centered around the 6. Organization organization of the business, necessary finances and 7. Freedom from government intervention required human resources 8. Strong fiscal responsibility Operations development – includes advertising, 9. Strategic development accounting, pricing suggestions, marketing, 10. Picking winners production, training, distribution, operations, field staff, market research and management. Steps in Strategic Planning Process Useful to Franchisors Characteristics of Successful Franchisor 1. Scanning/assessing the environment – From two 1. Honesty - A great franchisor is honest about any perspectives: external and internal. External challenges that your new business might face and influences on the firm such as customers, lenders, what the corporate team plans to do about them. stockholders, competitors, suppliers and government 2. Marketing Oriented. Good marketing is at the core regulatory agencies, can help the firm identify the of every successful franchise. Franchise systems competitive issues it confronts. Internal factors should have advertising campaigns and organize include capabilities of the business, its facilities, promotions that will create a buzz for the brand and locations, image, firm’s management, organization drive traffic to each location structure and culture that should be carefully 3. Good Communicators. Effective communication is assessed. This two-part analysis is what many would the foundation of a healthy relationship between the call a situation audit which is the attempt to franchisor and franchisee. determine the franchise business’s current operating 4. A Visionary. The franchisor should set clear goals situation in the context of the environmental factors both for the short-term and long- term. They should (external and internal) that affect operations. have the necessary leadership skills to instill this 2. Developing strategic plans – The firm’s mission and vision in the franchisees and employees. analysis of past results 5. Altruistic/Selfless concern for the well-being of should be carefully assessed and refine if necessary. others. Some not-so-good franchisors are more 3. Implementing Strategic plans – The overall interested in the royalty fee. purpose of this step is to allocate the firm’s resources 6. Passionate and Pragmatic. A good franchisor is to achieve the best possible market response given passionate about the franchise and what it does. They the market conditions and the resource capabilities of are willing to go above and beyond to push the brand the firm. message and ensure the franchise is a success. At the 4. Continuing review – The goal is to ensure that the same time, the franchisor is pragmatic and makes strategic planning process keeps the business good decisions that are best for the company. responsive to ever-changing market conditions. 7. Fully Committed. Being an entrepreneur has its ups and downs. It comes with challenges, risks and THE PROCESS OF MANAGEMENT tribulations. The franchisor must provide direction that can be described through the management functions. The management process described here primarily involves day to day business operations as well as 4. Franchise Broker – is generally an independent strategic planning. third party who simply solicits prospective franchisees PLANNING – is the primary responsibility of the for the franchisors. Franchise brokers generally work owner-manager. Planning concerns the following: for several franchisors at the same time and provide - Determining the overall goal, mission, and objectives information to prospective franchisees concerning of the franchise. many franchising opportunities. - Formulating policies, plans of action, and procedures (when appropriate) for attaining the objectives of the Five major activities associated with the Directing franchise organization. function ORGANIZING - is the coordination of human, 1. Giving Directives – Directives can be given in either financial and physical resources deemed necessary to written or oral form. Written directives may be in the reach the objectives set forth in the planning phase. form of memos, notices on bulletin boards and DIRECTING - Direction is used to achieve the written instructions. Oral directives involve face to franchise organization’s objectives while building an face contact and are specifically designed for the two organizational climate conducive to encouraging or more persons involved in the communication. superior performance. 2. Supervising – is about the training and disciplining if CONTROLLING – involves the determination of required, of personnel employed in the franchise performance standards, appraising performance with organization. Supervision is a set of activities to standards and providing rewards or taking corrective ensure prompt and proper execution of directives. action. 3. Leading – is meant to influence others to willingly provide effort and cooperation in order to achieve the Multiunit Franchising - A multi- unit franchise is when objectives of the organization. a franchisee purchased the rights to develop and 4. Motivating – Understanding people and how and operate multiple units in a particular territory. When why they behave as they do is a vital part of a you own multiple units, you are less likely to be franchisor’s and franchisee’s job to motivate their involved in the day-to-day operations of a single unit. people. A single-unit franchise- means that you entered into 5. Communicating - effective downward an agreement with a franchisor for just one franchise communication must be use in giving directives. unit and no expectations for later expansion into multiple units. QUALITY- refers to the perception of the degree to Methods of Developing Multiunit Franchises which the product or service meets the customer through: expectations. 1. Area developer – The franchisee(developer) is given the right to develop and operate multiple units KEY TERMS in a given area. This right generally is accompanied by Area Developer- An area developer, as a franchisee, obligations to establish a specific number of is given the right to develop and operate multiple franchises in the designated territory over a given units in a given area. This right is usually has an amount of time. obligation to establish a specific number of franchises 2. Master Franchisee/Sub franchisor – This individual in the designated territory over a given period of time. has the right to offer and sell franchised units, collect Area representative- One who is usually employee fees, and provide services within a given territory. of the franchisor with the right to solicit for Often, this individual is not a franchisee, but an agent prospective franchisees but does not have the right to who is directly responsible for selling franchises in a contract with the franchisees. Also, often the area given geographic area. representative has responsibility for training 3. Area Representative - This person is generally an franchisees, provide periodic inspections on employee of the franchisor who has the right to solicit franchised units, set marketing and advertising for prospective franchisee but does not have the right schedules and may provide consulting to franchisees. to contract with franchisees. Franchise Broker- An independent third party who solicits prospective franchisees for the franchisor.  Master Franchisee- One with the right to offer and 4. Grand opening and ongoing advertising programs sell franchised units, collect fees, and provide constitute extremely important services provided by franchise system services within a given territory. This the franchisor. Though a franchisee may be able to create some advertising, it is not likely that individual person is not a franchisee but an agent who is franchisees will be able or capable of funding responsible for selling franchises in a given geographic sophisticated, carefully designed advertising program. area. Multiunit Franchisee- One who owns or operates Strategic Planning is the process of formulating and maintaining organizational objectives and operational more than one franchised unit. Who have often be capacities to allow the franchise organization to granted geographic area within or near urban areas. function effectively within its ever-changing Situation Audit- An attempt to determine the firm’s environment. current operating situation in the context of its Reasons why problems occur in applying strategic external (environmental) and internal factors and planning in smaller businesses/Characteristics of condition that affect its operation. Small Businesses. MODULE 2 1. Limited resources are available. 2. Scale of operation is smaller. The Franchising Market Process- 3. Government regulations and compliance Franchise marketing refers to the marketing strategies requirements can significantly increase operating and tactics franchisors and franchisees use to attract expenses. new clients or customers to increase awareness and 4. Minor changes in operating efficiency can affect drive revenue to their franchise organization. business profitability. Franchise marketing is the process and methods 5. Firms are often without specialized staff to address franchisors and franchisees use to attract and retain legal, accounting and other needs of business. new clients and customers. 6. Owner often lacks objectivity needed to evaluate Marketing – Involves everything that it takes to get a and plan activities efficiently. product or service into the buyer’s hands. The 7. Business often fails to have sufficient working franchisor must be certain to get the right product or capital, financial controls or materials or inventory on service to the right customer at the right price and at hand. the right time and place. Marketing strategy consists of identifying one or Steps in Strategic Planning A successful franchisor more target markets and creating a marketing mix. takes several steps in the strategic planning of a The marketing mix consists of controllable factors to franchised business. These steps are the following: be considered in combination to satisfy the needs or wants of customers in the target market.These factors Franchise organization mission - Establishing the include the four P’s: Product, Price, Place and franchise mission is the first step in strategic planning. Promotion. The methods to be used to accomplish the overall mission should be clearly set forth by the franchisor The Franchisor’s Principal Responsibilities with before any franchisees are recruited. regard to the marketing function center on the Hierarchy of objectives and strategies - The second following core marketing issues: step in strategic planning is for the franchisor to use 1. Business Image is the image that the franchisor the mission statement to formulate a detailed set of “packages” for public consumption. It is the key supporting objectives for the major functions of the attraction for potential franchisees and customers to business. Objectives should be determined for the franchise system’s products and services. It must functions such as marketing, finance, human be distinctive and appealing. resources, and operations, and then arranged in hierarchy according to importance. 2. Determining the market direction is a crucial decision in the early stages of the development of a Determining Niche(s) suitable to company strengths franchise system. – This third step involves choosing a propitious niche within which the franchise can target its operations in 3. Recruitment and selection of Franchisees should its industry. The market niche defines as the product be based on the profile of the type of people desired, features aimed at satisfying specific market needs, as their goals and aspirations, skills, financial capability, well as the price range, production quality and the motivation, and level of commitment required of a demographics that is intended to impact. It is also a franchise owner-operator small market segment. Products and Services - A franchised business often strategy should include considerations of the product opts to expand in order to achieve synergistic results line to be offered to the customer and it should for the business. Synergy occurs when two separate consider set of products in light of all products that actions performed together to produce a greater compete for customers in the target markets. effect than either can separately. This is sometimes called “1+1=3” effect. Action Plans and Tactics- The Franchisor should turn the marketing strategies into specific plans of action Market Strategies for continuity and growth - or tactical programs that provide answers to the Marketing strategies outline your overall game plan following questions: What exactly is to be done in for how you'll find and attract clients or customers to each market segment offering the product? When will your business. These strategies must be consistent the activities be started and completed? Who is and flexible to ever changing market needs. responsible for these activities and their outcomes? How much will it cost to implement this plan of STEP IN MARKET STRATEGY MAKING action? Objectives The franchisor should develop a set of objectives based on the mission of the franchise organization that are consistent with the scope of the Market Research and Intelligence business. The objectives of a franchised business should be specific and quantifiable. Marketing research is a systematic process for identifying marketing opportunities and solving Threats and Opportunities The franchisor should marketing problems, using customer insights derived monitor the external environment to identify factors from the collection and analysis of marketing which may pose major threats or provide significant information. Marketing research identifies the opportunities for the franchised business and its problem to be solved or the opportunity to be product. explored, as well as the information required to address research questions. List of external factors that can have immediate or long-term impact on a franchised business Market research and intelligence can be viewed from both an internal and an external perspective 1. Competition – To what extent is competition increasing/ decreasing? who are the competitors? Internal market information is data from controllable activities of the franchise system. 2. Target Market/s – What demographic trends can mean opportunity? threat? External market information needs are outside the realm of activities controlled by the franchise system. 3. Government – Are there any changes in regulations? Tax laws? Marketing mix are the set of controllable elements the franchisor and franchisee put together or 4. Technology – Are existing technologies for my integrate to reach the target market. business stable? Maturing? 5. Suppliers – Is availability of substitutes on the horizon? Cost effective? 6. Sociocultural – Are there any emerging trends in fashion, lifestyle, preferences? 7. Overall economy and my industry – What are the changes in the current situation of relative economic health? What is the economic health of my industry? Target Markets -The overall strategy includes clear descriptions of target markets or market segments on which the franchisor intends to focus. Each specific market or market segment will have unique GENERIC CATEGORIES OF GOOD OR SERVICES characteristics, usually couched in terms of consumer 1. Convenience goods or services – are frequently preferences and spending patterns. purchased, usually are low to competitively priced, and are staples, emergency or impulse buys. Example Product/Service mix - Product mix are range of – Convenience/gasoline store. associated products that yields larger sales when marketed together than individually. The marketing 2. Homogenous shopping goods or services – are stabilized. Sales of the product are still usually at a purchased less frequently than convenience products. relatively high level. The customer typically shops for the best bargain among goods or services that are considered highly Stage 4: Decline - during this stage, it is typical for similar if not the same quality. Examples – Retail sales volume to drop as demand shifts to other clothing and accessories. products. KEY TERMS 3. Heterogeneous shopping goods or services – Are shopping goods perceived by consumers as markedly Business Image: The image the franchise system different in quality and attributes; price is “packages” about itself for public consumption. consequently less important. Examples – Auto dealerships, flower shops, legal or accounting Convenience goods or services: Goods frequently services. purchased that are usually low-to-competitively prices, are staples, emergency or impulse buys. 4. Specialty products or services - A specialty product/service is a product/service that certain Heterogeneous shopping goods or services: Are consumers will actively seek to purchase because of shopping goods perceived by consumers as markedly unique characteristics or loyalty to a specific brand. different in quality and attributes; price is They are looking for specific brands or products that consequently less important. match their personal preferences. Examples – Homogenous shopping goods or services: Goods Wedding gowns, optical services, custom catering. purchased less frequently than convenience goods. Product is not just an item or service. It carries with it The customer typically shops around for the best a unique set of physical and psychological bargain among highly similar goods or services. characteristics or attributes designed to satisfy the Inseparability: means that the production and wants or needs of an individual or a group of people. consumption of a service cannot be separated from CHARACTERISTICS OF SERVICES the provider of that service. 1. Perishability – means that a particular service Intangibility: The lack of tangibility of a product or cannot be inventoried or stored for a period of time. service such as what can be seen, smelled, tasted or Examples – Sport events, concerts. heard prior to purchase. 2. Intangibility – refers to the lack of tangibility of a Marketing: Involves everything it takes to get a product or service such as what can be seen, touched, product or service into the buyer’s hands. smelled, tasted or heard prior to purchase. Examples Marketing Mix: Controllable factors to be considered – child care, education. in combination to satisfy the needs or wants of 3. Variability - means the random, or unwanted, customers in the target market. levels of quality that the customer can receive as they Marketing Strategy: Consists of identifying one or purchase, receive, and consume the service. more target markets and creation of a marketing mix 4. Inseparability - means that the production and to reach the targeted customer group. consumption of a service cannot be separated from Perishability: Means that a particular good, the provider of that service. It also requires that a component or service cannot be inventoried or stored customer is physically participating in the over a period of time consumption of the service. Examples - a haircut, treatment by a doctor. Product: A unique set of physical and psychological characteristics or attributes designed to satisfy the Product Life Cycle life cycles always have four stages: wants or needs of a targeted customer group. Stage 1: Introduction – is a period of slow, gradual Specialty Products or Services: is a product/service sales growth. During this stage, the product does not that certain consumers will actively seek to purchase have much name recognition or customer loyalty. because of unique characteristics or loyalty to a Stage 2: Growth – there’s a sharp increase in product specific brand. recognition and acceptance as more consumers seek Variability: The random, or unwanted, levels of more of the product. Market demand increases, sales quality that the customer can received as they and profits may seem to soar. purchase, receive and consume the product or Stage 3: Maturity - occurs when the rate of sales service. growth slows and ultimately, sales level off or Typical Marketing Tactics by Type of Innovation Category The Sales Playbook Selling- is the process of persuading potential A sales playbook is more than a series of call customers to buy some goods or services or ideas scripts and sales sheets. It’s a go-to guide for so that certain interests of buyers can be satisfied tackling a salespeople’s biggest challenges, a and the seller gets paid. Selling is the highest paid roadmap for reducing new hire onboarding time and first profession in the world. Selling is any and the secret to driving big productivity gains. transaction in which money is exchanged for a It is a flexible document developed by good or service. salespeople to help them reach out to the Sales Package customer generally, includes five sections/subjects: Most franchisors develop a sales package which they can use as they build out the sales 1. Mission Statement – is simply your presentation to the prospective franchisee. This introduction to the buyer; this allows you to generally consists of three parts: introduce yourself, your business, and even a benefit to the prospective franchisee/customer in 1. Introductory Folder - contains an introductory forty words or less. statement and an invitation to prospective franchisees to join the franchisor’s family as they 2. Inquiries – One of the easiest ways to learn build out wonderful business opportunity. information about the prospective franchisee or customer is simply to ask person questions. The 2. Sales Brochure - an in-depth explanation of the easiest way to inquire is to ask questions using franchise, which may include a letter from the who, what, when, where, how or why. franchisor, an invitation to become involved in the franchising business, testimonials from 3. Opening Benefits – is based on the prospective existing franchisees, or pictures illustrating a buyer’s problem or need; provides an typical franchise operation, as well as financing opportunity for them to improve themselves and and background information; also includes an their situation; benefits are divided into four application to become a franchisee. classifications known as the 4 Ps of selling – power, profit, pleasure and prestige. “Features 3. Uniform Franchise Offering Circular – A never sell, Benefits sell” regulatory document describing a franchise opportunity that prospective franchisees have to 4. Listening – It is estimated that 50% of receive before they pay any money, sign any successful selling is listening. papers or, in some cases, even meet with the 5. Close – the most wonderful part of any selling franchisor. process is the close. Closing a sale occurs when the seller and buyer agree to the conditions of the sale and the buyer makes a firm commitment to the transaction. The Rules of Selling marketing products and services.. This involves specifying the data required to address these Remember the following simple rules of selling as issues, then designing the method for collecting you become a professional salesperson.. information, managing and implementing the 1. Sell benefits not features. data collection process. 2. Ask questions using who, what, when, where, Market research and marketing are a sequence how & why. of business activities; sometimes these are 3. Be honest. handled informally. Marketing research may be 4. Listen intently. divided into the following four steps. 5. Do not refer to yourself. 6. Allow the other person to talk at least 60 1. Define the problem and/or research objectives. percent of the time. The proper marketing research questionnaire is 7. Always be closing. not as difficult to develop as many people 8. Always make an effort. perceive it to be. 9. Be positive. 10. Enjoy the game, realizing it is a game. To approach the two primary target markets and develop the proper screening process, these four steps need to be followed. 1. Targeting markets - Target in marketing is that segment of the total universe of potential customers of your product or service which are most likely to provide the most revenue. 2. Segmenting the markets – A market segment refers to the prospective franchisees or end consumers who are related by some common 2. Developing the Research Design. Three basic characteristics. It is a grouping of customers who steps to adequately design your sample. will respond similarly to a given set of marketing promotions. >Describe the population for which the information is desired. 3. Profiling the customer – To do this, it is critical to look at three different aspects of customer > Explain the sample selection procedures. behavior. > Specify all procedures required for contacting > Customer needs – the desired goal or objective the respondents which the customers want to obtain. 3. Implement Research Plan. It is important to > Customer benefits desired – the result the realize that it may take several days longer to customer wishes to achieve and the reason why collect all information. Three different methods they will purchase your product. of data collection may be use: > Purchase characteristics – the behavior and > Mail questionnaire – generally preferred by requirements affiliated with the customer’s academics because of the low cost. buying habits. > Phone call interviews – has become the best 4. Qualifying the market segments – this will method because of the lower cost and eliminate allow you to sell to prospective franchisees and bias interference. your end consumers. > Person to person interview – can create serious Marketing research is the systematic gathering, bias responses and with a high cost. recording, and analysis of qualitative and 4. Analysis and Reporting of Results. Marketing quantitative data about issues relating to research is a valuable tool when it is properly collected, tabulated, and analyzed. The collection information; also includes an application to of data and its tabulation has provided the become a franchisee. owners and operators an opportunity to better > Sales playbook: a flexible document developed understand the end consumer. by salespeople to help them reach out to the The four main areas of qualification a franchisor customer; generally, includes sections for a is expecting from a franchisee are as follows: mission statement, inquiries, opening benefits, listening and close. 1. Common interests or desires > Target: Target in marketing is that segment of 2. Trust/honesty the total universe of potential customers of your 3. Availability product or service which are most likely to provide the most revenue. In franchising, the 4. Financial capability target is divided into two different categories: the prospective franchisee and the end customer. Co-branding occurs when two brands are combined in a business offering. According to KEY TERMS Ellen Shubart, co-branding columnist for Franchise >Four Ps of Selling: different types of benefits: Times, “No one is keeping tabs on the precise numbers, but growth in co-branded franchises power, profit, pleasure, and prestige. appears to be higher than growth in franchising > Introductory folder: part of sales package given alone.” to the prospective franchisee by the franchisor; a Co-branding has been described as the combining and two-sided information sheet about the retaining of two or more brands to create a single, franchising opportunity, including an introductory unique product or service. Co-branding (also known as statement and an invitation to prospective piggyback franchising and dual or combination franchisees to join the franchise. franchising) > Market segment: a grouping of customers who The Federal Trade Commission (FTC) defines co- will respond similarly to a given set of marketing branding as an activity in which “two or more promotions. franchisors combine forces to offer a franchisee the opportunity to operate two or more > Mission Statement: an introduction to the franchises in one outlet.” buyer in forty words or less, should cover the following: (1) name and company name, (2) Co-Branding examples business objectives, (3) the type of problem to be solved for the customer, and (4) benefits of the business > Opening benefit: begins an actual sale and moves toward the close, based on the prospective buyer’s problem or need; provides an opportunity for them to improve themselves and their situation; divided into four classifications known as the 4 Ps of selling. > Sales brochure: also, part of the sales package, an in-depth explanation of the franchise, which may include a letter from the franchisor, an Branding invitation to become involved in the franchising The American Marketing Association defines a business, testimonials from existing franchisees, Brand as a name, term, sign, symbol, or design, or pictures illustrating a typical franchise or a combination of them, intended to identify operation, as well as financing and background the goods or services of seller or group of sellers and to differentiate them from those of competitors. A Brand can then be a trademark, CO-BRANDING FORMATS name, logo, or symbol representing the franchise. 1. Single Franchisee/Single Franchised Under Trademark law, the franchisor holds Brand/Additional Nonfranchised Brand – occurs exclusive rights to the use of its brand or when a single franchisee obtain the rights to trademark for perpetuity. distribute a second nonfranchised brand or vice Brand equity consists of four dimensions: brand versa. Example – Gingiss formal wear(franchised loyalty, brand awareness, perceived quality of brand, brand) has begun to co-brand with local and brand association. Some franchise systems, independent dry cleaners(nonfranchised). however, have experienced the Halo effect – when a strong, well-known brand links with a lesser known 2. Single Franchisee/Dual Franchised Brands – one and the second brand is lost in the halo of the occurs when a single franchisee obtain the rights first. to franchise a second system. Emergence of Co-Branding 3. Dual Franchisees/Dual Franchised Brands – occurs when two local franchisees decide to Co-Branding is becoming prevalent across the coexist and build their stores together. franchising landscape for several reasons. These are the common motivational factors among 4. Portfolio Management of Multiple Brands – franchisors and franchisees to go into co- occurs when a franchisee brings together branding: numerous franchise systems to provide a comprehensive and market-tailored opportunity 1. Mature markets – many franchise sectors are at the retail level. mature markets that provide little opportunity for sales and profit growth through traditional KEY TERMS outlets. Co-branding represents a new approach that can revitalize mature units. Brand: identifies the franchise system, can be a trademark, name, logo, or symbol representing 2. Labor shortages – many co-branded units that the franchise share space require only about one and one-half times the labor of a single unit, not double the Brand equity: the uniqueness of a franchise amount. system which is necessary for its competitive advantage in the marketplace, consists of four 3. Land shortages – as franchise sectors reach dimensions: brand loyalty, brand awareness, maturity, fewer choice locations are available to perceived quality of brand, and brand association support further expansion efforts. Co-branding: when two brands are combined in a 4. Consumer demands – franchising customers business offering, also called “dual branding,” today are looking for convenience. They are also “multibranding,” “cross-system franchising,” and looking for one-stop shopping. “strategic alliance”; now considered a standard business practice for franchises The advantages and disadvantages of single vs. multiple brand offerings before entering co- Halo effect: when a strong, well-known franchise branding. system links with a lesser known one and the second gets lost in the “halo” of the first. Managing the Franchisor’s Operations Process Franchise package-The franchise package should include a location in which the franchisee can set up shop. The exact type of franchise will determine the necessary qualities the location should have the franchise package represents the types of support a franchisor provides a franchisee. Franchise package is generally divided into two > Operating Manual: the bible of the franchise parts: system that is a ready and regular reference to address the vagaries and uncertainties of day-to- PROMOTIONAL PACKAGE day operations of the franchised business. OPERATIONS PACKAGE - The second part of a > Operations package: the second part of franchise package is the operations package. The franchised package, usually fairly extensive and operations package is fairly extensive, and the often put in the form of manuals; assists the materials are often put in the form of manuals. franchisee to properly conduct the operation of The information contained in the manuals is the franchise. meant to assist the franchisee to properly conduct the operations of the franchise. > Pre-opening manual: includes checklists of activities and steps that must be completed before the grand opening can take place. Promotional package: the carefully prepared information developed and given by the franchisor to prospective franchisees in order to (1) solicit franchisee applicants to the franchise system (2) provide basic information about the franchise and (3) illustrate the follow up forms KEY TERMS used to sign franchisees. >Advertising Manual: a guide to effective >Record keeping manual: describes a communication and promotion of the franchise standardized accounting and record keeping product to the targeted audience covering at system that will provide a means of obtaining least four topics: advertising, promotion, graphics accurate financial information with a minimum and signage, and public relations time and effort. > Field support manual: identifies the services >Recruitment package: consists of recruitment provided by the franchisor to each franchisee brochure, a disclosure document and other including such services as training inspection, information about the benefits and opportunities record keeping, financing planning and quality control standards and procedures as well as of becoming a franchisee with the franchise recommend forms and procedures for use in system; used as the part of the franchisor’s evaluating the performance of the franchised response to initial inquiries by a prospective business. franchisee. > Formal training program: a structured program > Site inspection manual: describe each item for the franchisor to help new franchisees included in an inspection, along with the criteria develop specific knowledge about the franchise used and procedures to be followed by the system and the business factors important to franchisee including a daily or weekly log for the running a successful franchised unit. franchisee to complete. > Marketing Manual: describes the franchisor’s >Training Manual: a guide for teaching operating marketing philosophy; discusses in detail the procedures and personnel management used in features and characteristics used to market the formal and ongoing training programs, ideally fills franchised business offering, including in the gaps between the knowledge of a information about packaging, labeling and prospective franchisee or future employee and consumer services that franchisees should make the level of performance expected by the available. franchisor. > Ongoing Training: onsite training provided by the field staff of the franchisor after the franchisee has entered business.