Franchising: U.S. Businesses Go Abroad
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Authors
Sanchez, Steven
Issue Date
1991
Type
Thesis
Language
en_US
Keywords
Alternative Title
Abstract
The process of expanding a successful business by selling the rights to
the name and system of that business, commonly known as franchising, is
quickly becoming the most widely used method of expansion.
Franchising began in the United States following the Second World War,
and was originally used to create the chains of fast food operations that today
dot the countryside. Small, successful businesses wishing to expand but
lacking the capital to do so, improvised a solution to their problem. By selling
the rights to their unique business systems and names, these companies, in
return for a flat fee and royalty payments, gave individuals seeking to own their
own operations a proven business system along with a recognizable name.
A variety of methods have been used by franchisors to expand their
franchises. Many sell a franchise unit in return for a fee and royalties, others are
joint-partners, and still others employ "conversion franchising." No matter which
method is chosen, statistics show that a new franchise has a much greater
chance of success than a new, unique business. Franchises have the
advantage over other operations due to a variety a factors. The key points,
however, are name recognition and the support system inherent in any good
franchise. Successful franchisors train their franchisees to efficiently operate
their stores, preparing them for many of the problems which will arise based on
their own experiences and those of other franchisees. A single unit operator
does not have this advantage. He or she enters into the market less prepared
than a franchisor.
U.S. franchisors have not been content with just working within our
nation's borders. Many have expanded their operations overseas, mostly to
other industrialized nations, but to the Third World as well. Foreign markets are
seen as ripe for U.S. franchises seeking to increase their revenue and
reputations. Crossing borders has not always been easy, especially in
developing nations. Many countries do not have laws which protect
trade names and trademarks, while others have strict laws regarding the extent
to which a franchisor can maintain his presence in their country. Most
governments do not like the idea of U.S. franchises operating within their
nations because of royalty payments. While welcoming foreign investment, they
do not encourage the outflow of much needed currency.
In Asia, established franchises have encountered situations similar to
what they experienced in the United States, have had their ideas blatantly
copied after being welcomed with open arms, and have had to restrict their
operations in other cases due to government regulations. Despite a myriad of
problems, U.S. franchisors, especially in the fast food industry, have been very
successful.
In Eastern Europe and the Soviet Union, there are thousands of people
with the desire to own their own business but with no idea of how to go about
doing so nor what to do if and when they achieve their goal. These markets are
perfect for U.S. franchisors who can train such people in the Western style of
doing business and then sell them their own units. The total population
represents an immense market.
Franchising is a concept that will continue to grow all over the world. The
U.S. is not the only country that has its own franchisors. All of these businesses
are seeking to expand their operations, and if the trend is followed, most will be
successful. The Asian market has barely been tapped, and Eastern Europe and
the Soviet Union have opened their doors to franchising in the hopes that it will
increase the prosperity of the region.
Description
vii, 84 p.
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License
U.S. copyright laws protect this material. Commercial use or distribution of this material is not permitted without prior written permission of the copyright holder.