Holiday Inns and Mc Donald’s, both saw unmatched growth in the 1960s. Their growth opened another direct business operation—franchising(特许经营).
These operations have the same general pattern. The franchisor, the parent company, first establishes a successful retail(零售)business. As it expands, it sees a profit potential in offering others the right to open similar business under its name. The parent company’s methods and means of identification with consumers are included in this right. The parent company supplies skill, and may build and rent stores to franchisees. For these advantages the franchisee pays the franchisor a considerable fee. However, some of the advantages and disadvantages are different.
By extending a “proven” marketing method, a parent can profit in several ways. First, the franchisee’s purchase price gives the parent an immediate return on the plan. Then the sale of supplies to the franchisee provides a continuing source of profits. As new businesses are added and the company’s reputation spreads, the value of the franchise increases and sales of franchises become easier. The snowballing effect can be dramatic. Such growth, too, brings into play the economies of scale (规模经济). Regional or national advertising that might be financially impossible for a franchisor with 20 franchises could be profitable for one with 40.
The parent, then, finds immediate gains from the opportunity to expand markets on the basis of reputation alone, without having to put up capital or take the risk of owning retail stores. Added to this advantage is a less obvious but material one. Skilled, responsible retail managers are rare. People who invest their capital in franchises, though, probably come closer to the ideal than do paid managers. In fact, the franchisee is an independent store operator working for the franchisor, but without an independent’s freedom to drop supplies at will. Of course the factory’s costs of selling supplies are less. But also certainly the franchisee buying goods that have had broad consumer acceptance will not casually change supplies, even when the contract permits. If the hamburger is not what the customer expected, they may not return. Having paid for the goodwill, the franchisee won’t thoughtlessly destroy it.
Franchising may give you the idea that as a franchisor, you need only relax in the rocking chair. Franchising, however, has problems to be solved.
Franchising refers to a business operation in which a successful parent company_________.
A. sells name-brand goods to a private investor
B. rents proven ideas and techniques for investment
C. sells the right, the guidance to a business under its name
D. takes no advertising responsibility for individual investors
The advantages of franchising to the parent company are all the following EXCEPT________.
A. an immediate investment return
B. the ownership of additional retail stores
C. the profit from the sale of supplies
D. the possibility of profitable advertising
The passage mainly tells the reader_________.
A. the advantages and disadvantages of franchising
B. the benefits of franchising to the franchisor
C. the unmatched economic growth in the 1960’s
D. some regional and national business operation
What will the author probably discuss after the last paragraph?
A. More advantages of franchising.
B. Risks of investment besides franchising.
C. The standard of consumer acceptance.
D. Negative aspects related to franchising