WHAT IS A FRANCHISE

WHAT IS A FRANCHISE?

Although owning your own business has proved to be rather risky, many people prefer to work fourteen hours a day, seven days a week for themselves than eight hours a day, five days a week for a large corporation. Therefore buying a franchise seems to be the perfect solution because it brings together independence and a measure of security .The franchise operation brings a corporation with a famous product together with an individual desiring to start a small business.

The franchisor grants this franchisee the exclusive right to use the franchisor's name in a certain territory, in exchange for an initial fee plus monthly royalty payments .This: type of operation enables the company to establish outlets for its product o service without major capital in vestment. At the same time the franchise faces less risks than an independent entrepreneur, because the large organization provides financial and managerial assistance.

Franchising began in America already in the nineteenth century. At present the fastest growing franchise operations in the areas of foodstuffs soft drinks, hotels, motels, fast food establishments and even real estate dental care and video.

According to some experts, during times of high unemployment people are more likely to buy franchises. Some will even mortgage their homes to buy franchises.

Franchising helps to solve two major problems the small businesses are constantly faced with: lack of money and of know-how. The franchisor unlike many independent proprietors has enough experience to estimate start-up costs realistically and therefore he will not grant the franchise unless the prospective franchisee has enough money for the start-up costs. But if accepted, the franchisee has the advantage of being able to buy supplies and to obtain credit and insurance at low costs.

Training, advice on advertising, taxes and other business matters, as well as instructions in the routine day-to-day operations are also provided by the large company.

Still, there are also some important drawbacks to be considered. Chief among the disadvantages is the monthly payment or royalty .If the outlet does poorly, most of the profit may end up going to the franchisor.

Another drawback of franchises is that they allow very little independence .If the business is so tightly controlled ,some franchises might in the end, feel like employees.

Although franchises can offer the small business person a good way to set up a shop, they should be carefully considered before every decision is made.

Text Comprehension

1. Read the text carefully and try to explain the following key words:

franchise

small businesses

royalty

managerial assistance

real estate

mortgage

lack

grant

advertising

- venture-capital

- start-up company

2. Answer the following questions :

- Why do many people prefer to work on their own ?

- Which is the perfect solution for independent businessmen without financial means?

- What is a franchisor?

- What are the duties of a franchisee?

- Has franchising any advantages for a large company?

- What kind of assistance does the large organization provide to the franchisee?

-When did the first franchising businesses start in America?

-Mention some drawbacks of franchising.

Topics for speaking and written essays

a) The bright side and the dark side of franchising

b) Possible franchise businesses in the town you live

c) Advantages and disadvantages of small businesses as compared to large corporations.