According to the World Intellectual Property Organization (WIPO), franchise operations have grown steadily through the last 50 years, and today account for almost a third of all retail sales. The idea of a “franchise” in business discourse refers to a sub-set of characterizations used to define and describe a formal business relationship between a franchisee and franchiser. The WIPO defines this as “a business arrangement which allows for the reputation, innovation, technical knowledge and expertise of the franchisor to be combines with the work, industry and investment of a franchisee”. In a franchising model, the franchisee uses another business firm’s successful business model and brand to operate what is effectively an independent bra...
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...tionships, these commitments are also dependent on sales, which can be independent factors to the work of the franchise owner. The time-duration of these financial commitments is also extremely binding.
Required commitments of resources are two impositions on franchise owners that are a cause of great disadvantage, however, arguably the greatest disadvantage to owning a franchise is the lack of control that franchise owners’ have over brand image. In the event that an international brand was destroyed, local business owners of that franchise – who are unrelated - will be greatly affected. It is important to note this also flows the other way in the direction of the franchiser, whose brand could also be destroyed by the poor performance of franchisee operators. This reliance is a constant source of tension and dynamic of operations in franchise business operations.
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