Definition of Franchise, History, Types & Types (Discuss Completely)
Definition of Franchise, History, Types & Types (Discuss Completely) – Have you ever heard the word franchise? Must have, then what is the franchise? aroundknowledge.com will discuss it. If you are a businessman or want to start a business, you should at least know terms that exist in the business world so that you can get the most out of doing business and not experience failure.
Definition of Franchise, History, Types & Types (Discuss Completely)
One very popular business model is franchising, let's look at the explanation.
Definition of Franchise
Franchising in English is called franchising & in French it is called franchising which means rights or freedom, is the right to sell a product, service or service. In Indonesia, franchising is an agreement in which one party is given the right to use it or take advantage of the nature of a business owned by another party by paying compensation to the giver right. At its core, franchising is selling a complete, ready-made business package that includes trademarks, materials, and management.
According to Indonesian Franchise Association, what is meant by franchising is a system of distributing goods or services to end consumers, where the owner a mark gives rights to an individual or company to run a business under the name, brand, system, procedure, management. and the method has been determined. within a certain period of time and cover a certain area.
Franchise History
We will discuss the chronology of the beginning of the franchise, the franchise which was first introduced in the 1850s by a sewing machine maker Isaac Singer when he was looking to increase the distribution of his sewing machine sales That. His business failed, but he was the first to introduce this franchise business in the US. Furthermore, this method began to be followed by other franchisees who are more successful, John S Pemberton, who is the founder of the Coca Cola company.
However, from other sources, what followed Singer was not Coca Cola, but from a US automotive industry, General Motors Industry, namely in 1898. Another example in the US is a telegraph system, which is already being operated by various road companies railroads, but is controlled by Western Union and is also an exclusive agreement between car manufacturers with dealers.
Currently this franchise is more dominant in fast food restaurants. This trend began in 1919 when A&W Root Beer opened a fast food restaurant. in 1935, Howard Deering Johnson in collaboration with Reginald Sprague which is used to monopolize the modern restaurant business.
Their idea is to let their partners independently use the same name, food, supplies, logo and even build a design which in exchange for a payment. In its development, the business system has undergone various improvements, especially in 2011 The 1950s which became known as a franchise that is a business format or also known as a generational franchise second.
The development of the franchise system is quite rapid, especially in the US, causing this franchise to be popular as a business system in various business fields, which accounts for 35 percent of all existing retail businesses in the US. Meanwhile in England, the franchise was initiated by J. Lyons which was through his efforts Wimpy and Golden Egg, namely in the 60s. Franchise business knows no discrimination. The owner of the franchise in selecting prospective business partners is guided by mutual benefits, and not based on SARA.
Types of Franchise
Franchise is divided into two:
Overseas Franchise
Overseas or foreign franchises are one type of franchise originating from abroad, this type of franchise is more preferred because it has a clearer system and mechanism, the brand has been accepted in various parts of the world, and is felt more prestigious. For example: McDonald's, (KFC) Kentucky Fried Chicken, Bread Talk, Starbucks, Pizza Hut, and so on.
Domestic Franchise
Domestic franchise, namely a type of franchise originating from within the country, this type of franchise is an investment choice for people who want to quickly become an entrepreneur but do not have sufficient knowledge of the initial tools and continuation of this business which is provided by the owner of franchise. For example, local franchises: Primagama, Alfamart, Martha Tilaar, Roti Buana, Edward Forrer, Bogasari Baking Center and various other franchises.
Franchise Types
In practice, there are several types of franchises, namely:
Trade Name Franchising
This type of franchise is to get the right to produce, for example PT. Great River owns the rights to manufacture clothing for Triumph under license from Germany.
Product Distribution Franchising
In this type, franchising is obtaining rights in distribution in certain areas, for example soft drinks, cosmetics.
Pure Franchising/Business Format
This type of franchise gets the full rights, starting from trademarks, sales, equipment, methods operations, marketing strategies, management assistance and even techniques, as well as quality control, and etc. Examples are restaurants, fast food, education, and consultants.
Advantages and Disadvantages of Franchising
Advantages in entering international markets with franchising business, namely:
- Experience and success factors
- Financial assistance from franchising
- Brand name and reputation
- Business is awake
- There are quality standards
- Low production costs
- Management readiness
- Management and technical assistance
- Higher profit
- Territory protection
- Get the benefits of market research and product development
- The risk of failure is relatively small
- The franchisor provides a lot of help, to the franchise
Franchising Disadvantages:
- Franchisor training programs are sometimes far from expectations
- Franchisor gives little freedom
- Franchise fees tend to be very large
Franchise Management Contract
One way for companies to expand or expand their business overseas is to do this by entering into a management contract, as in a contract This management can be done if a company leases its expertise or knowledge to the government or foreign companies in the form of human resources (HR). These people or workers come to the government or companies and manage their interests. This method is often carried out if there is an installation of new facilities, whether nationalization is carried out by government to business entities that were previously owned by foreigners or the private sector, as well as for companies that are currently in business difficulty.
Management contracts are often encountered in turnkey operations, which the company will deliver handling services for all new facilities, including in design, construction, and in its operation. The problem that is often encountered during this operation is the length of the contract period, which results in a long payment schedule and creates a greater risk in the market currency, as in a long time the money market is not always stable and also tends to fluctuate, so that financial risk will become increasingly big. Competition in this business will increasingly increase with increasing overseas capacity and new facilities.
Thus our discussion this time about Definition of Franchise, History, Types and Types (Discuss Completely), hopefully it can be useful for all of us, thank you.
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