Forever Yogurt is a shop that sells yogurt. The franchise was opened in June 2010 in Chicago and over the years, it has turned into one of the most popular yoghurt dens among the youth. Forever Yogurt has approximately 14 flavors of yogurt that it offers to its highly esteemed customers. Because of the continuous improvement in the performance of the Forever Yogurt shops in U.S, the management is planning to extend its operations to other prime markets across the region. The management has opted to extend its operations into Australia through a franchise. A franchisee pays a royalty fee to a franchiser in order to be given the right to use the franchisor’s trade mark, continuous technical support, the authority to sell its products and services and the ability to use the franchisor’s system of doing business.
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The use of a franchise strategy is very instrumental for new businesses because they are given an opportunity to use a brand name of a company that has been successful in branding. Similarly, the new business is given an opportunity to use a business system that has been tested and perfected through try and error method. It is noted that franchisor’s first carry out a market research in order to establish the likely performance of the venture before selling a new outlet. Therefore, those entrepreneurs who buy such outlets are confident of their success because they are aware of the demand of their products or services in advance (Peterson, 2003).
In most cases, the franchisors allow the franchisees to adopt any legal structure that best suits them. However, in some instances the franchisor’s demands that all franchisee to be a limited company because of some technicality associated with the franchise business. A franchise can also be sole trade where the business is owned by a single individual. Thirdly a franchise can be operated as a partnership whereby the shop is owned and managed by more than one person. Therefore, the Forever Yogurt Company should use one of the three available legal structures when extending its operations to Australia. The firm should sell its outlets either as partnership, sole trade or as a limited company (Benson, 1999).
The establishment of fees is a major weakness of the franchisee strategy. The pricing of franchise products and services is not done in the manner in which pricing is done in other businesses. Many business establishments find it prudent to change their products, services, and prices with the intention n of enhancing their overall financial performance. Similarly, most businesses are free to negotiate with their suppliers to cut down prices of raw materials in order to reduce the cost of production so that the businesses can make more profits. However, these strategies are not present to franchisors. Once franchise fees, rates or royalty are established, the franchisor does not have the freedom to make adjustments unless with their future franchisees.
Fees in a franchisee are set at an optimal level. The prices are set at optimal level because setting it too high makes the franchisees to record low profits and may render marketing of new franchisees difficult. Similarly, setting the prices too low makes the franchisors have insufficient revenues to offer franchisees the services they need.
Franchisees get training about the basic concepts on how to operate their own business venture. The training occurs in two phases. The first step entails a thorough training that takes place at the head quarters. It involves the theory and practical experiences. The graduates receive certificates after completing the training. The second part of the training takes place at the business premises and involves training the staff prior to the operation of the business (Kirimi, 2007).
The franchisor is the one who establishes essential controls to ensure that the brand of the company is protect as well as make sure that the revenue of shareholders is maximized. The brand is protected through ensuring that appropriate copyrights are enacted. Similarly, the franchisor regulates the services and products offered by the franchisees in order to guarantee delivery of high quality products and services to the customers.
Benson, A 1999, Legal Structures of Franchisees, Cambridge University Press, Cambridge, Mass.
Kirimi, B 2007, Training and Support in a Franchisees, Prentice Hall, New York. Peterson, M 2003, Franchisee Strategies, Prentice Hall, New York.