Define franchising. What sort of marketing activities are undertaken in a franchise arrangement?
Franchising, in a simpler term, is a contract that gives the right to use a name, process of technology from a party to other. It can be called as an agreement between two parties which allows franchisee the authority to use trademark, operating methods etc from a franchisor. Franchising allows an individual to inherit the brand and expertise associated with that brand while a new company can also have relevant industry and company data, that is with the parent or franchisor. Kirk W. Reilly says Franchising is a safe way of expanding as it ensures cetain montly francising fees to the company together with the percentage of sales. However, there are certain benefits of franchising, when it comes to marketing, because these franchising company have common advertisment funds for the purpose of conducting systemwide, regional and local advertisement, all different franchisee under one umbrella. For our simplicity, we consider two marketing activities as follows.
Brand Advertising, Which is related to the entire franchise system and has the objective to promote the company’s overall brand, not being specific of certain location or products. The company uses its centralized budget, often called as marketing funds /Internationall marketing fund just to promote the company and its brand which is contributed in regular basis by the franchise by the agreement. We watch many advertisement of McDonalds, which doesn’t quiet talk about the location but tries to establish a good image of the products of that company.
Local advertisement tries to promote one franchise outlet by the funds of some specific branch. The marketing materials are included in the franchise agreement, that provides details on how marketing should be done or not done. The company might give a guidelines on the brand color to use, the logos to use and other different instructions to help the franchisee understand the brand consistency. Say, KFC in Durbar marg can market its product and location differently than its Tripureshwor branch.