Transcripts
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an initial fee, that is to say a fee paid at the beginning of the business arrangement, and also an ongoing management service fee. This management service fee is related to the volume of business the franchisee is doing, so it might be calculated as a percentage of the turnover, or as a mark-up on supplies provided by the franchisor. So there are two kinds of fee: the one-off initial fee to set up the franchise, and the ongoing management service fee.
CD1 Track 20 Ex 3.2
Listen to Part 2 of the lecture.
Part 2 Section 1
There are a number of issues you need to consider when deciding whether or not to franchise your business. Firstly, there needs to be a relatively stable, long-term market for the product or service you are franchising. This is partially because substantial investment in time and money is required to set up and develop a franchise operation, and partly because you need an established market with potential for long-term growth to attract franchisees. So, something like a chain of hairdressing salons might offer potential for a franchise, because there will always be a demand for women to have their hair cut and styled. On the other hand, a franchise to promote and sell a new kind of children’s toy might be less successful, because toys tend to have a short market lifespan.
Section 2
In addition – and this is fairly obvious – you will need a fairly wide margin between cost and income. Remember that the gross margin needs to provide a return on the investment to both the franchisor and the franchisee. So you will need to keep costs low and prices as high as the market will bear. One advantage of a franchise operation is that supplies can be bought in bulk across the whole franchise, which will help to keep costs down. But you can see that franchising would be unsuitable in a market where the margin between cost and income is very narrow.
Section 3
The franchisor will need to provide support and training to the franchisee because, in addition to the brand, what you are selling is a way of doing business that has proved successful. You will need to produce an operating manual that
describes in detail all the different systems and procedures involved in the business, and the performance and quality standards, but you will also have to provide some kind of training for the franchisees and possibly his employees, certainly in setting up the operation and possibly on a regular, ongoing basis. The important point here is that for a franchise to be successful, it should be possible for the franchisee to develop the skills required to operate the business fairly quickly. So, although some initial training may be required, the franchisee should be able to operate the business efficiently and successfully within a few months of start-up. In some types of franchise, the skills required may be acquired quickly; in others, the franchisee may have already developed most of the necessary skills in previous employment. So, for example, someone operating a franchise in the restaurant industry is likely to have experience either as an employee in a restaurant, or in a similar field.
CD1 Track 21 Ex 3.4
Listen to Part 2, Section 1 again and answer the following questions.
Section 1
There are a number of issues you need to consider when deciding whether or not to franchise your business. Firstly, there needs to be a relatively stable, long-term market for the product or service you are franchising. This is partially because substantial investment in time and money is required to set up and develop a franchise operation, and partly because you need an established market with potential for long-term growth to attract franchisees. So, something like a chain of hairdressing salons might offer potential for a franchise, because there will always be a demand for women to have their hair cut and styled. On the other hand, a franchise to promote and sell a new kind of children’s toy might be less successful, because toys tend to have a short market lifespan.
CD1 Track 22 Ex 3.5
Listen to Part 2, Section 2 again and answer the following questions.
Section 2
In addition – and this is fairly obvious – you will need a fairly wide margin between cost and income. Remember that the gross margin needs
Listening 79
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