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Deal with risks

between different franchise agreements

 

STUDENT PAPER

By Aurélie Driant

SKEMA Business School

Paris, France

 



Abstract

Europe is the most dynamic sector around the world for franchises business, 14 000 franchisors are registered. Moreover, this number is raising up year after year since 1930. According to this information we can think that the franchise unit is an easy way to set up. But what’s happened in reality? What are the main risks when someone decide to sign his first franchise agreement? How could we be sure to sign the more relevant franchise agreement?  Thanks to this paper the reader will be able to understand the difference between the direct franchising and the master franchising agreement. Then a comparison between four agreements will be developed. By using the additive weighting technique, we are going to prove that multi-unit agreement with an area development is the best choice for handling a successful business without any particular background.

Keys words:  Franchise qualities, Contractors, Security, Franchisor, Franchises, Viability, Business success

Introduction

Nowadays, the franchise sector in France represents more than 55 billion of euros every year. The number of franchisors has tripled between 2004 and 2016. In France, this dynamic sector includes 1900 franchisors for more than 70 000 franchises. These numbers are not impressed when you know that franchisor has twice as likely to overpass two years of its existence instead of an individual company.

Under the definition of Oxford dictionary, a franchise is defined as: « An authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities, for example acting as an agent for a company’s products. »

Franchise contract is signed between two independent parties. The franchisee will have the right to use services under the operating methods of the franchisor. Besides, the franchisor will provide rights and resources to support the franchisee.

The most notorious names in this sector are:

  • 7Eleven: food and various product distribution stores, born in 1920 in the US, which includes 60 000 stores in 18 countries
  • Subway: fast food restaurants, born in 1965 in the US, which includes 44 500 restaurants 27 000 of which are in US
  • MacDonald’s: fast food restaurants, born in 1955 in the US, which includes 36 000 restaurants around the world

Many rumors say that buying a franchise is an easy way to set up: « Everything is all set-up for you », « You’re buying a business in a box when you buy a franchise ».

Within all of these sentences, how could we find an objective point of view to look for the most successful business? Which are the exact risks when we decide to set up a franchise unit?

This document aims at, first defining the main risks within a franchise contract and then to identify and analyze them against different franchise agreements.

Thanks to this essay, the future contractor will be able to understand the different handling risks between different contracts. This essay will go further through the pros of franchise ownership and the cons of franchise ownership. Then, we will able to know which agreement is going to be the most relevant for handling a successful franchise business without any particular background.

More…

To read entire paper, click here

 

 Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].

How to cite this paper: Driant, A. (2018). Deal with risks between different franchise agreements, PM World Journal, Volume VII, Issue VII – July.  Available online at https://pmworldjournal.net/wp-content/uploads/2018/07/pmwj72-Jul2018-Driant-deal-with-risks-between-franchise-agreements.pdf



About the Author


Aurélie Driant

Paris, France

 

 



Aurélie Driant
is currently a student at Skema Business School in Paris for the preparation of a Master 2 Grande École specialized in project management & business development with a semester in China and the US  2 years of experience in the high-end retail, hotel and e-commerce sector at international level.