Organizational Growth Strategies: Franchise Agreements, Support systems, and Obligations

ENT 630 Organizational Growth

Growth strategy is “Strategy aimed at winning larger market share, even at the expense of short-term earnings.” (https://businessdictionary.com) When it comes to taking a business to next level, there are many strategies which can be used to promote growth. However, one particular strategy is usually at the forefront of this topic of discussion: Franchising. This tried and true method has proven to be successful for many decades. Think NAPA Auto Parts and McDonald’s. Such franchises require a lot of planning, and those who are interested in such an undertaking would be wise to explore the ins and outs of franchise agreements, support systems, and the obligations which will be involved throughout the process.

Franchise Agreements

A franchise agreement is a legal and binding contract between a franchiser and a franchisee. According to Kerry Pipes, contributing writer at franchising.com, there are “10 fundamental provisions outlined in some form or fashion in every franchise agreement,” which includes the following provisions:

  1. “Location/territory.
  2. Operations.
  3. Training and ongoing support.
  4. Duration.
  5. Franchise fee/investment.
  6. Royalties/ongoing fees.
  7. Trademark/patent/signage.
  8. Advertising/marketing.
  9. Renewal rights/termination/cancellation policies.
  10. Exit strategies.” (Pipes | 68,923 Reads)

To read the full article, click here.

Support Systems

Having a solid support system as a franchisee is essential for success. The franchisee should evaluate franchise opportunities thoroughly, making sure they have access to crucial resources such as training and ongoing support from the franchiser. The article, Franchise Support: What you can expect, is a good resource for those who are considering franchise opportunities as it conveys very valuable information on what to look for in franchising opportunities and how to evaluate those opportunities in an effective manner. The article challenges “prospective franchisees” to do “research,” beyond talking with a representative of the franchise; it also suggests having “in-depth conversations with other franchisees in your investigation because if they have been satisfied with the franchise support system, you most likely will be as well.” (Franchise Support: What you can expect) One of the most important questions any potential franchisee can ask is, “How much is this really going to cost me?” However, this can be a loaded question. Franchisees must learn “whether or not the fees and costs that must be paid to a franchise are fair, reasonable and appropriate.” (Elgin, 2006) To find answers to these questions and more, click here.

 Obligations

The franchiser and the franchisee are legally bound to one another to create a successful and profitable business venture. Each has their own unique set of obligations, and these obligations may be different from company to company and from state to state. Some of the “ongoing responsibility a franchiser may have” are “marketing strategies,” “financing,” and “brand building.” (Franchiser Responsibilities) According to Franchisedirect.ie, the franchisee’s responsibilities may include, but are not limited to, “financial responsibility, business responsibility, and personal responsibility.” (Dawson, 2017) As previously stated, the responsibilities of both parties will be defined in the franchise agreement.

Works Cited:

Dawson, A. (2017, December 19). Home. Retrieved November 20, 2018, from https://www.franchisedirect.ie/information/the-franchisees-rights-and-responsibilities

Elgin, J. (2006, August 14). Is the Price Right? Retrieved December 02, 2018, from https://www.entrepreneur.com/article/164820

Franchisor Responsibilities. (n.d.). Retrieved November 20, 2018, from https://www.franchiselawsolutions.com/franchising/franchisor-responsibilities.html

Franchise Support: What You Can Expect. (n.d.). Retrieved November 20, 2018, from https://whichfranchise.co.za/franchise-support-can-expect/

Pipes, Kerry | 68,923 Reads. (n.d.). The Franchise Agreement. Retrieved November 20, 2018, from https://www.franchising.com/guides/the_franchise_agreement.html

What is growth strategy? definition and meaning. (n.d.). Retrieved November 20, 2018, from http://www.businessdictionary.com/definition/growth-strategy.html

 

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