Franchising for Food Products and Shoes- MyAssignmenthelp.com

Question: Discuss about theFranchisingfor Food Products and Shoes. Answer: Franchising is a business model of conducting business by using the agency of a third party to carry out the business operations. The owner of the business or the franchisor enters into a contract with another entity called the franchisee. The franchisor allows the franchisee to carry on the business by using his brand name exclusively in a specified area for a specified time. The former shares the business secrets and resources according to the contract with the latter. The franchisee may have to pay franchisee fees to the franchisor to get the franchising rights. Franchisee has emerged as a foreign market entry strategies followed by many multinational companies like KFC. These companies give the entities in the foreign countries exclusive rights to market and sell their products. The franchising model has become famous in several markets like food products, shoes, apparels and so on. One of the market where franchising is the most common way of business expansion and revenue gener ation is fast food industry with players like KFC. It is worth noting that this model has finds mention in internal magazines, articles and several other forms of literature proving its profitability. Franchising is the contract between two parties, the franchisor and the franchisee. The franchisor allows the franchisee to use its brand name, goodwill and resources to conduct business. It has emerged as a very successful model especially for business expansion because of several reasons. First, the franchisor can enter foreign markets and sell his products which allows him to maximize his revenue. Secondly, the franchisee can use the brand power of the franchisor and sell his products to earn profits. The franchising model is usually followed by international brands with strong market presence. So the franchisee can use the brand power of the franchisor to run his business. Thirdly, the franchisor may provide the franchisee initial support by training the staffs so that they maintain the standard of operations befitting its international fame. The franchisee relation is dependent on contract between the parties regarding sharing of profits, fees and so on. There are also laws to p rovide to a party if the other party infringes the contract. This relationship stands by legal contract, mutual benefit, understanding and ethics. The franchisor and franchisee are legally separate bodies and are governed by Competition and Consumer (Industry CodesFranchising) Regulation2014Competition and Consumer (Industry CodesFranchising) Regulation. (2014) (Buchan et al., 2015). The European Union however has no specific acts governing franchising business but individual member nations have their laws. Globalisation has opened new business opportunities for the multinational companies which often use this model to enter the foreign markets. Lam et al., (2014) in their work states that franchising model facilitates flow of foreign capital and goods in an economy. The model leads of foundation of new business entities which leads to generation of employment. The articles then goes on to state that franchising organisations are concentrating towards sustainable growth to promote more development of the society. This form of business is used by a number of companies to enter foreign markets. The fast food companies have been successful in following this format and earning high profits. The Kentucky Fried Chicken(KFC), the Pizza Hut and Star Bucks are some of the internationally famous and successful fast food chains in the world following the franchising model. KFC is one of the biggest international fast food chains following the franchising model to expand its business. The company was founded by Colonel Harland Sanders and at present is owned by Yum! Brands. The history of KFC shows that it was among one of the first companies to adopt franchising models to expand its special chicken products in the United States. The company in fact brought about disruptive innovation to jeopardise the market of hamburger. KFC offer fried chicken wings, bone chicken, crushers or shakes, deserts and soft drinks, which was previously provided by PepsiCo during its tenure as owner of the company. KFC is the world most well known restaurant chain which is associated with the United Nations World Food Programme and local organisations around the globe to help the underpriviledged (Kentucky Fried Chicken, 2017). van Tongeren and Stolwijk, (2013) in their work state that the multinational chain of fast food use the digital space to promote their products. Thus , the franchising model followed by KFC can generate income for the digital companies like Facebook due to their huge customer base around the globe. The franchising model used in fast food industry and KFC in particular is of great importance because of the benefits it brings about for its stakeholders. The model has a great future and is worth exploration in the internal magazine of the marketing company. KFC is listed on the New York Stock Exchange and as per the financial reports of 2015, the company aims acquire a franchise mix of 98 percent by the end of 2018. The company earned operating profit of $1625 and $1402 in 2016 and 2015 respectively (Yum! Brands Annual Report, 2017). This shows that franchising as a business model has a great future because brands like KFC can encourage entrepreneurial ventures in emerging countries like India, South Africa, China and Brazil. KFC helps the entrepreneurs to gain a profitable market position by using its brand power. The high quality product strategies, layers of products like burgers and crushers, efficient marketing planning process, sales management and affordable prices brings about positive buyer decision. The franchisees cater to the huge customer base of the company and earn huge revenue. The customer retention power of KFC ensures that its franchisees keep on flourishing in the market and it continues to generate employment and revenue. No doubt, the model has become an important subject for internal magazine and internal training that is communicated and circulated within several organisations. The franchising model of business helps the companies to expand their business and encourages entrepreneurial ventures. The companies like KFC and other fast food chains generate employment and revenue. They offer variety of tasty products at affordable prices to their customers. These benefits of franchising business have made it worth stating in several literature like internal magazines. Research Proposal: Research Problem: The research proposal delves into the future of franchising by studying literature works by various authors. Key Themes: The key themes are the future of franchising model of business and its utility to the stakeholders like governments, franchisors, franchisees, customers and other stakeholders. The study of KFC as an example of franchising business in the fast food industry shows that franchising also contribute towards the development of the society. They often collaborate with the United Nations and other non government bodies to help in bettering lives of the underprivileged. This shows that franchising models can contribute social development and brighter future. The power of the franchising model to revenue generation, encourage entrepreneurial ventures, employment generation and other socioeconomic benefits show that it has a great future. The Future Significance/Contribution of the Research: The future significance of franchising model as means to do business and generate huge profit can be judged from the market position of KFC. While discussing the future of franchising model Lee et al., (2015) states that franchising model has gained importance in most of the developed markets in the world. The multinational corporations are slowly spreading into new markets to diversify their business risks as the global finance is recovering. The article then goes on to lay emphasis on the entrepreneurial growth to enhance the economic development of the economies. The authors also accept that entrepreneurs are under uncertain conditions and limitation of resources which curd their venturing abilities. The big multinational companies help these entrepreneurs to start new business and earn profit by the virtue of the brand power of these multinational franchisors. nThis makes the franchising model of business expansion and profit generation of great future significance. It is capable of benefitting the customers by providing high quality and affordable products. It can also benefit other stakeholders like governments, the parties involved and so on. The Agency Theory of Franchising: The agency theory points out the relationship between the principal and agent in the business world. The franchising business model is a form of agency theory where there are two parties, the franchisor and the franchisee. The franchisor gives the franchisee exclusive right on carry on business on his behalf in a new market. They share the profit based on contracts which has provisions for profit sharing, charges the franchisee will pay to the franchisor and so on. Zhang, Lawrence and Anderson (2015) in their work state that agency theory of franchising model has three primary stakeholders, the customers, franchisor and the franchisee. It is a triad where the franchisor affiliates the franchisee to open outlets using its name to attract customers. The franchisee in return of the affiliation pays fees to the franchisor. The agency relationship between the two is dependent heavily on contract having mentions about profits and all other provisions already discussed (Kacker et al., 2016). References: 2016 Yum! Brands Annual Report. (2017). Yum.com. Retrieved 10 May 2017, from https://www.yum.com/annualreport/ Buchan, J., Frazer, L., Zhen Qu, C., Nicholls, R. (2015). Franchisor Insolvency in Australia: Profiles, Factors, and Impacts.Journal of Marketing Channels,22(4), 311-332. Kacker, M., Dant, R. P., Emerson, J., Coughlan, A. T. (2016). How Firm Strategies Impact Size of Partner?Based Retail Networks: Evidence From Franchising.Journal of Small Business Management,54(2), 506-531. Kentucky Fried Chicken. (2017). kfc.com. Retrieved 10 May 2017, from https://www.kfc.com/ Lam, S. P. L., Martnez, J. L. C., Zanoguera, L. M. B., Carrillo, S., Valenzuela, A. C. B. (2014). Measuring Organizational Environment and Its Relationship with Leadership in a Fast Food Franchise in Tijuana, Baja California, Mexico. Lee, Y. K., Kim, S. H., Seo, M. K., Hight, S. K. (2015). Market orientation and business performance: Evidence from franchising industry.International Journal of Hospitality Management,44, 28-37. van Tongeren, M., Stolwijk, A. M. (2013). Multi-channeling and the use of Social Media by companies of the Service and Product typology. Zhang, J. J., Lawrence, B., Anderson, C. K. (2015). An agency perspective on service triads: Linking operational and financial performance.Journal of Operations Management,35, 56-66.