The role and importance of franchising
It is now widely accepted that franchising plays an important role in furthering the development of modern business. Franchising as a business concept is fully established in the USA, indeed nowhere else is it actually found to be developed so intensively in a number of industry sub-sectors comprising of food, non-food, financial and other service businesses¼ˆBeilock, 1998¼‰. Even outside the USA growth rate of franchising is impressive. As far as Europe is concerned, franchising made its first appearance as early as 1929 in France and has been on the increase ever since.
Franchising is already well known and has an increasing role in national economies, being also assisted by divestment programs in the state and publicly owned enterprises. In some developing countries, franchising has been adopted by national governments as one of the strategies for faster economic development and is considered a major tool for providing faster job creation and new incomes (Clarke, 1997). Various research studies have identified that the failure rate of businesses using franchising is generally lower than those of the “conventional” startups. However, it has also been proven that the development of franchising depends on the overall economic circumstances and that its growth can be significantly impacted by the performance of the economy as a whole. It should be also be pointed out that the failures in franchising are possible and that franchising is not “a panacea” to cure ailments (Huszagh, 1992).
All these issues highlight the need to understand the benefits as well as limitation in using franchising as a tool to open business. It is also vital to identify which measures and tools should be used and how, for facilitating and promoting franchising with a purpose of optimizing its benefits. It is also important to understand the ways to build up franchising into a successful business into an overall economic development (Preble, 1995).
1.2 The growth of franchising (from book ) Franchising as a legal or marketing concept was not new when its wide use commercially started to develop in the late 1940s and 1950s, principally in the USA as well as in other countries. Nevertheless, it is a concept which remains misunderstood by many despite its widespread use. Franchising is not an industry it is a method of marketing goods and services which knows almost no boundaries in terms of business categories (Quinn, 1999). Franchising has proved over many years in the UK, as well as I the rest of the developed world and in many developing countries, that it is a viable method of distributing goods and services which can have positive influence on economic development by its contribution to the establishment of new businesses and job creation. There has been a gaining in momentum, resulting in a rapidly expanding use of this marketing method (Sang havi, 1998).
In examining the growth of franchising one must start in the USA as not only is it the cradle of modern franchise development, but also it is the largest market place for franchising systems and until recently provided the bust statistics. It is undoubtedly the largest exporter of franchising systems despite the great advances which have been made in other countries, notably Canada, Japan, Australia, France, Germany and the UK. Franchising in some form exists in over 140 countries and that number will continue to grow (Lincoln