Good planning, financing and management are essential to any type of small firm. This is true whether the firm is a franchisee1, a newly created firm, or an established firm under new ownership. That franchisees have a lower failure rate than other new small businesses is due in most cases to the managerial assistance provided by the franchisorS2. Failures can occur in any type of small firm when management does not apply continued good practice in the operation of the firm.

Franchising became very popular in the decade of the 1970s, and this growth has continued in the 1980s. Franchising is basically a system for distributing products or services through associated resellers. The franchise3 gives rights to the franchisee to perform or use something that is the property of the franchiser. The parent company is the FRANCHISER. The small business owner who buys a franchise is the FRANCHISEE.

The objective of franchisees is to achieve efficient and profitable distribution of a product or service within a specified area. Both parties contribute resources. The franchiser contributes a trademark4, a reputation, known products, managerial know-how, procedures, and perhaps equipment. The franchisee invests capital in the purchase of the franchise and provides the management of the operation in accordance with rules set down by the franchiser. Marketing procedures may be specified, and a common identity is established.

Most franchises can be classified into one of the three categories that follow:

– STRAIGHT-PRODUCT-DISTRIBUTION FRANCHISES. Under this type of franchise, which is the most popular today, franchisers merely supply the franchisees with their products in salable form and the franchisees sell them in that same form. Auto agencies and appliance shops are prominent examples. The franchisers earn their profit from the price at which they sell to the franchisee.

– PRODUCT-LICENSE FRANCHISES. In these cases the franchisees use the franchiser's name but manufacture their products to comply with5 the franchiser's requirements. The franchisers provide brand6 identity and usually specify methods of manufacturing and/or distributing the product.

– TRADE-NAME FRANCHISES. Under this type of franchise, the franchiser licenses its trade name to the franchisee but seldom exercises any control over the product or service being marketed. Equipment distributors often use tin's method of franchise.

Franchising offers its maximum advantages when undertaken with due consideration for the interests of the franchisee as well as the franchiser. The following table lists advantages to both parties.

To the franchiser

To the franchisee

1. Expanded distribution without increased capital investment.

1. Sound management procedures, training, and decision-making assistance made available by franchiser.

2. Marketing and distribution costs shared by franchisee.

2. Pre-established promotion and advertising programs provided.

3. Some operating costs may be transferred to franchisee.

3. Being part of large system of RetailerS8.

4. Flat fees7 often collected each month from franchisee.

4. Possible financial aid for part of purchase price at low interest.

5. Retains quality control of product via franchise agreement.

5. Credit available in buying inventory and supplies.

Some disadvantages of franchise also exist. These include the following:

To the franchiser

To the franchisee

1. Long distance control over franchisees.

1. Usually gives up much freedom in management decisions.

2. Expenses of training supervisory personnel and keeping them on the road.

2. Obligatory purchases from franchiser, even if better prices are available elsewhere.

3. Profits always shared with franchiser.

4. Franchises have become very expensive.

Despite the great growth and popularity of franchising in recent years, it should be noted that not all franchises have been successful. Great care should always precede any decision to buy a franchise.

It is obvious that franchising has taken an important place in the small business field in this country. Many American franchisers have extended their franchises around the world. This significant development, when handled with proper consideration for both parties, can provide real advantages to both franchiser and franchisee.


Notes: 1. торговое предприятие, пользующееся правом торговать продуктами промышленного предприятия на льготных условиях; 2. компания, имеющая патент на деятельность; 3. франшиза, особое право, особый контракт; 4. торговая марка; 5. отвечать, исполнять; 6. сорт, качество, торговая марка; 7. одинаковая плата; 8. розничный торговец.

1. Match the words with their definitions.


1) Sums of money spent on the running of a business in such a way that they do not add to the value of its assets.

2) A special mark that is placed on a particular brand of article or commodity to distinguish it from similar goods sold by other producers.

3) Formal permission in writing, from an authority recognized by law, to perform an act with, without that permission, would be unlawful.

4) Lack of success; inability to pay debts; insolvency, bankruptcy.

5) To get something especially by working.

6) The act of using money to obtain income or profits; money invested.

7) An arrangement by which a monopoly producer gives another producer or trader by formal licence the exclusive right to manufacture, or sell the products in a certain area.

8) The price paid for something.

9) The right to hold a thing entirely as one's own, including complete and permanent control over it.

10) Paying a profit; producing an income; useful.

2. Supply the sentences with the missing words


1) There are a growing number of women who want ... some of the traditional male roles.

2) New products must... certain standards.

3) The United Kingdom had to make a... of £1,000 million to the EEC budget.

4) They are almost totally dependent on Western ... .

5) A week ago the firm's... jumped from 10 percent to 114 percent.

6) Education is carried out... the principles of the school.

7) More information becomes... through the use of computers.

8) Unions took strike action to stop the production and... of the local newspaper.

9) Economic stability can only be reached if demand and... are in approximate balance.

10) Communities who live by hunting and gathering still... .

3. Find words in the text to complete the following expressions:

Under new... supply their products in...

A lower failure... offers its maximum...

A system of distributing... possible financial...

The parent company is... freedom in management...

4. Complete the list below:














5. Complete the following sentences by putting the verbs into either the Present Perfect or Past Simple.

1) We (reach) our targets last year.

2) Sales (fall) since the beginning of June.

3) Contracts (be signed) but work (not begin) yet.

4) The marketing department (recruit) two new assistants so far this year.

5) We (start) the advertising campaign last month and since then sales (rocket).

6) Turnover (rise) dramatically since we (be founded).

7) We (expect) a fall in profits last year as our costs nearly (double).

8) We (sell) already more units this year than we (do) in the whole last year.

6. Choose from the modal verbs below in order to complete the dialogue: Must/may/can/have to/could/should.


Surely your brands... be worth more than that?


Well, it's very difficult to say. They... well be. However, we prefer to put it on the conservation side.


I... say I find these figures hard to believe. After all, a company that wanted to create a brand would... pay a fortune in advertising alone.


Yes, that's true, but you... not put a figure on brand creation – it depends on so many factors.


I agree, but we... calculate from a historical basis.


That's not the point. The real value is the long-term potential profit. How... you estimate them?


Well, you... have annual sales forecasts?


Of course, but if we are going to value them in the balance sheet, we... have a longer-term perspective.


In my opinion what you... do... take ten years' potential net income.

7. Complete the following sentences, using an appropriate verb of speaking (speak, tell, talk, say) and a preposition, where necessary.

1) He... us that some managers rate each subordinate by different standards.

2) He... to us... shifting standards.

3) He... that to be effective, the appraisal method must be seen to be fair.

4) He... to us... how personal biases distort rating.

5) He... that an increasing number of organizations deal with the problem of bias by asking for explanations of ratings.

6) Then we... about rating styles.

7) He... about the different patterns of raters, some rate harshly, others rate easily.

8) He... us that the lack of uniform rating standards is unfair to employees.

9) We... to him that we thought it was also unfair to organizations.

Franchise – право использования торговой марки ("фрэнчайз"), за которое платится вознаграждение (fees); привилегия, предоставленная фирмой на продажу ее товара; привилегия; право голоса; франчайзинг (специальный вид лицензирования, когда компания - владелец известной торговой марки предоставляет другой компании право ставить эту торговую марку на свою продукцию, но при этом получает право контроля за качеством и т. д. продукции компании-франчайзера); франчайзинг, коммерческая концессия (соглашение, согласно которому правообладатель (франчайзер) обязуется предоставить пользователю (франшизополучателю) за вознаграждение на срок или без указания срока право использовать в предпринимательской деятельности пользователя комплекс исключительных прав, принадлежащих правообладателю (напр., на фирменное наименование правообладателя, объект исключительных прав товарообладателя (торговую марку); иногда предусматривает начальную финансовую поддержку со стороны франчайзера)); франшиза, торговая привилегия (лицензия, подтверждающая право пользования торговой маркой (а также технологией и т д.), предоставленное на условиях франчайзинга); лицензия Право на производство или продажу продукции другой компании; франшиза Компания, ведущая торговлю или занятая в сфере услуг, действующая путем передачи лицензий (франшиз) мелким фирмам или семейным предприятиям, которые действуют под торговой маркой фирмы, предоставившей лицензию. К крупнейшим и наиболее быстро растущим франшизам в США относятся, например, "Бургер кинг" [Burger King] , "Данкин доунатс" [Dunkin' Donuts] , "Доминоз пицца" [Domino's Pizza] , "Блокбастер видео" [Blockbuster Video] и др.; франчайзинг (специальный вид лицензирования, когда компания – владелец известной торговой марки предоставляет другой компании право ставить эту торговую марку на свою продукцию, но при этом получает право контроля за качеством и т. д. продукции компании-франчайзера)

Franchise agreement – соглашение о привилегии [о льготе]; соглашение об исключительной уступке

Franchisee – получающая сторона в договоре франчайзинга; торговое предприятие, реализующее изделия промышленного предприятия на основе договора франшизы; франчайзи, франшизополучатель (торговое предприятие, получившее право (франшизу) на торговлю продукцией под торговой маркой другого предприятия)

Franchisor – передающая сторона в договоре франчайзинга; промышленное предприятие, заключившее с торговым предприятием договор франшизы; франчайзер, франшизодатель (лицо, выдающее другому лицу франшизу (лицензию) на производство или продажу своего фирменного продукта (услуги) на определенной территории)

Franchising – договор коммерческой концессии, франчайзинг (лицензионное соглашение, подразумевающее использование товарного знака и технологий со взаимными обязательствами и льготами между передающей и получающей сторонами, предоставляемое за плату и оформленное в соответствии с законом о товарных знаках)


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