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					16_Shane_index.qxd 12/2/04 3:49 PM Page 223




                                                                        INDEX




          A                                             local market knowledge, 11
                                                        local negotiating discretion, 11
          A&W Root Beer, 7
                                                        local production in limited
          Aaron’s Rent-to-own, 87
                                                              geographic markets, 8-9
          Abra Auto Body & Glass
                                                        performance measurement, 18-19
            earnings claim disclosures, 193
                                                        physical locations of businesses, 9-11
            financial impact of franchising, 62
                                                        standardization of products/services,
          advantages of franchising, 23-24, 206
                                                              12-13, 72
            capital acquisition, 32-34
                                                        training requirements, 13-14, 74-75
            human resource acquisition, 34-35
                                                        valuable system to sell, 68-71
            incentives for outlet operators, 26-30
                                                     Arabica Coffee House
            return on investment, 37-38
                                                        geographic expansion strategies, 166
            risk sharing, 36-37
                                                        subfranchising, 129
            selection of outlet operators, 24-25
                                                     Arby’s, 165
          adverse selection, 24
                                                     area development agreements, 127-129
          advertising, 93-99
                                                     Arthur Murray Dance Studios, 7
            cooperative advertising, 99
                                                     Arthur Treacher’s Fish and Chips, 181
            local advertising, 99
            national advertising, 94-98
            underinvestment in, 51-52
          appropriateness of franchising, 3, 67,     B
                  191, 206-207
            brand name recognition, 14-15            Baskin-Robbins, 164
            codification of business operation,      Bath Fitter, 127
                  13, 72-74                          Bathcrest, 127
            cost and risk of investment, 16-17       Ben & Jerry’s, 198
            labor-intensive industries, 15-16        Ben Franklin stores, 6
            large pool of potential franchisees,     Big Apple Bagels, 147
                  75-76                              Blimpie Subs and Salads, 69

                                                                                          223
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              224                                                                           INDEX

              bonuses, 28                                  contracts
              brand name recognition                         long-term contracts versus short-
                appropriateness of franchising, 14-15,              term contracts, 89-93
                      70                                     writing detailed contracts, 83-85
                international expansion strategies, 171    control over franchisees, 50-51
                national advertising, 94                   conversion franchising, 6, 162-163
                royalty rates, 149                         cooperative advertising, 99
              Burger King, 7                               cost of investment, appropriateness of
              business concepts, appropriateness for                franchising, 16-17
                      franchising, 67, 191, 207            costs, reducing, 27
                codification of business operation,        Country Inns and Suites, 197
                      72-74                                Crack Team, 109
                large pool of potential franchisees,
                      75-76
                standardization of products/
                      services, 72                         D
                training requirements, 74-75               Dairy Queen, 93
                valuable system to sell, 68-71             Damon’s Grill, 198
              business format franchising, 4               detailed contracts, writing, 83-85
              buying back franchised outlets, 161-162      Dippin’ Dots, 70
              buying franchises, reasons for, 191-193      direct financing, 118
                                                           disadvantages of franchising, 43, 206
                                                              financial impact, 61-62
                                                              goal conflicts between franchisors
              C                                                     and franchisees, 44, 49
              capital acquisition, advantages of              product innovation, 59-61
                       franchising, 32-34                     structural changes, 58-59
              capital-intensive industries, appropriate-      transaction costs, 49-57
                       ness of franchising, 15             disclosure, disadvantages of
              Carvel Ice Cream Factory, 76                          franchising, 56
              centralized services, 112-113                diversification, 16-17, 55
              Century 21 Real Estate, 162                  Doubletree Hotels, 196
              certification of franchisors, 184-186        Duct Busters, 195
              Coca-Cola                                    Dunkin Donuts
                 history of franchising, 6                    psychological profiling, 197
                 product franchising, 4                       royalty rates, 148
              codification of business operation,
                       appropriateness of franchising,
                       13, 72, 74
              Coldwell Banker, 87                          E
              collective action, disadvantages of          early growth period for franchisors and
                       franchising, 47-48                           company-owned outlets, 160-
              communication                                         161
                 advantages of franchising, 28-30          earnings claim disclosures, 192-193
                 managing franchisees, 201-202             East Coast Original Frozen Custard
                 support for franchisees, 113                 exclusive dealing, 87
              company-owned outlets                           exclusive territories, 135
                 expansion strategies, 158-163                field operations evaluation, 112
                 which outlets to franchise and which         field training, 110
                       to own, 164-165                        intellectual property, 56
              complementary policies, 100-102                 local advertising fees, 99
                 and territorial strategies, 136              long-term versus short-term
              Computer Tots, 193                                    contracts, 93
              conflict, minimizing when managing
                       franchisees, 199-200
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          INDEX                                                                             225

             national advertising fees, 98                large pool of, appropriateness of
             passive ownership, 82                              franchising, 75-76
             royalty payments, 88                         managing, 190, 199, 203, 210
             royalty rates, 150                              communication, 201-202
             trade secrecy, 57                               minimizing conflict, 199-200
             trademarks, 71                                  monitoring systems, 202-203
             training opportunities, 107-109                 profit motive, 200-201
             writing detailed contracts, 84               recruiting, 190, 193-194, 210
          economies of scale and appropriateness          selecting, 24-25, 194-198, 210
                   of franchising, 8                         industry experience, 195-196
          education, selecting franchisees, 196              net worth requirements, 196-197
          employees, hiring, 24                              psychological profiling, 197-198
          evaluation. See field operations                   staged screening, 198
                   evaluation; performance                   startup experience, 196
                   measurement                            support for, 105-106, 208
          excess profits, paying to franchisees,             amount to provide, 114
                   88-89                                     centralized services, 112-113
          exclusive dealing clause, 87                       communications, 113
          exclusive territories, 133, 136                    field operations evaluation,
          expansion rights, 131-133                             111-112
          expansion strategies, 155, 209                     financing assistance, 118-119
             company-owned outlets, 158-163                  real estate services, 114-118
             geographic expansion strategies,                training opportunities, 106-111
                   166-167                                termination, 53-55
             international expansion strategies,       franchises, reasons to buy, 191-193
                   167-171                             franchising
             when to first franchise, 156-157             advantages of, 23-24, 206
             which outlets to franchise, 164-165             capital acquisition, 32-34
          Express Oil Change, 113                            human resource acquisition,
                                                                34-35
                                                             incentives for outlet operators,
                                                                26-30
          F                                                  return on investment, 37-38
          Fantastic Sams, 117                                risk sharing, 36-37
          federal law regarding franchising,                 selection of outlet operators,
                    176-177                                     24-25
          Federal Trade Commission (FTC),                 appropriateness of, 3, 67, 191, 206-
                    7, 176                                      207
          field operations evaluation, 111-112               brand name recognition, 14-15
          field training, 109-111                            codification of business operation,
          financial impact, disadvantages of                    13, 72-74
                    franchising, 61-62                       cost and risk of investment, 16-17
          financing assistance, 118-119                      labor-intensive industries, 15-16
          first refusal right, 87                            large pool of potential
          Ford Motor Company, 6                                 franchisees, 75-76
          Fotomat, 54                                        local market knowledge, 11
          franchise fees, 142-145                            local negotiating discretion, 11
             relationship with royalty rates,                local production in limited
                    151-152                                     geographic markets, 8-9
          franchise sales force, recruiting                  performance measurement, 18-19
                    franchisees, 193-194                     physical locations of businesses,
          franchisees                                           9-11
             goal conflicts with franchisors, 44, 49         standardization of
             incentives for, 26-30                              products/services, 12-13, 72
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              226                                                                             INDEX

                    training requirements, 13-14,             new franchisors and company-
                       74-75                                        owned outlets, 159-160
                    valuable system to sell, 68-71            undercapitalized franchisors, 180
                 defined, 4-5                              free-riding
                 disadvantages of, 43, 206                    area development agreements, 128
                    financial impact, 61-62                   avoiding
                    goal conflicts between franchisors           with multiunit franchising, 80
                       and franchisees, 44, 49                   with national advertising fees, 96
                    product innovation, 59-61                 disadvantages of franchising, 49-52
                    structural changes, 58-59                 international expansion
                    transaction costs, 49-57                        strategies, 171
                 expansion strategies, 155, 209               relationship laws, 183
                    company-owned outlets, 158-163            which outlets to franchise, 164
                    geographic expansion strategies,       FTC (Federal Trade Commission),
                       166-167                                      7, 176
                    international expansion strategies,
                       167-171
                    when to first franchise, 156-157
                    which outlets to franchise, 164-165    G
                 history of, 5-7                           Geeks on Call, 108
                 legal issues, 175, 210                    General Motors, 6
                    federal law, 176-177                   General Nutrition Centers, 4
                    state law, 178-183                     geographic expansion strategies. See
                 management policies                               territorial strategies
                    advertising, 93-99                     global expansion. See international
                    complementary policies, 100-102                expansion strategies
                    controlling sources of supply, 86      Gloria Jean’s Coffees
                    detailed contracts, 83-85                 international expansion strategies,
                    excess profits, 88-89                          168
                    exclusive dealing, 87                     subfranchising, 130
                    importance of, 79, 207                 goal conflicts between franchisors and
                    long-term versus short-term                    franchisees, 44, 49
                       contracts, 89-93                    Golden Corral Family Steakhouse, 71
                    passive ownership, 80-82               good cause (termination of franchise
                    royalty payments, 88                           contracts), 182
                    termination rights, 85-86              Goodyear Tires, 4
                 pricing strategies, 141-142, 209          Great Clips, 133
                    franchise fees, 142-145, 151-152       growth, importance of, 30-31
                    royalty rates, 146-152
                 statistics, 1-3
                 territorial strategies, 123-124, 208
                    complementary policies, 136            H
                    exclusive territories, 133-136         headquarters operation, support for
                    expansion rights, 131-133                       franchisees, 114
                    multiunit franchising, 124-131         hiring employees, 24
              franchisors                                  history of franchising, 5-7
                 certification, 184-186                    hold-up, disadvantages of franchising,
                 early growth period and company-                   53-55
                       owned outlets, 160-161              human resource acquisition,
                 goal conflicts with franchisees, 44, 49            advantages of franchising,
                 mature franchising systems and                     34-35
                       company-owned outlets,
                       161-162
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          INDEX                                                                          227

          I                                           L
          IFA (International Franchise                labor-intensive industries,
                   Association), membership in,                 appropriateness of
                   184-186                                      franchising, 15-16
          incentives for outlet operators, 26-30      Lawn Doctor, 197
          increasing sales, 26                        lease-negotiation assistance, 116-118
          indirect financing, 118                     legal issues regarding franchising,
          industries, appropriateness for                       175, 210
                   franchising, 3, 67, 191, 206-207       federal law, 176-177
             brand name recognition, 14-15                state law, 178-183
             codification of business operation,      Liberty Tax Service, 97
                   13, 72-74                          limited geographic markets,
             cost and risk of investment, 16-17                 appropriateness of
             labor-intensive industries, 15-16                  franchising, 8-9
             large pool of potential franchisees,     litigation between franchisors and
                   75-76                                        franchisees, 46-47
             local market knowledge, 11               local advertising, 99
             local negotiating discretion, 11         local market knowledge,
             local production in limited                        appropriateness of
                   geographic markets, 8-9                      franchising, 11
             performance measurement, 18-19           local negotiating discretion,
             physical locations of businesses, 9-11             appropriateness of
             standardization of products/services,              franchising, 11
                   12-13, 72                          local production, appropriateness of
             training requirements, 13-14, 74-75                franchising, 8-9
             valuable system to sell, 68-71           long-term contracts versus short-term
          industry experience, selecting                        contracts, 89-93
                   franchisees, 195-196               loss of intellectual property,
          innovation, disadvantages of                          disadvantages of franchising,
                   franchising, 59-61                           55-57
          intellectual property, loss of (disadvan-   Lox of Bagels, 98
                   tages of franchising), 55-57
          international expansion strategies,
                   167-171
             changes necessary for, 169-171           M
             when to expand, 168-169                  MAACO, 4
          International Franchise Association         management policies, 190, 199,
                   (IFA), membership in, 184-186              203, 210
          investment costs/risks, appropriateness       advertising, 93-99
                   of franchising, 16-17                communication, 201-202
                                                        complementary policies, 100-102
                                                           and territorial strategies, 136
                                                        controlling sources of supply, 86
          J-K                                           detailed contracts, 83-85
          Jackson Hewitt Tax Service, 96                excess profits, 88-89
          Janetize America, 90                          exclusive dealing, 87
          Jani-King International, 90                   importance of, 79, 207
          Jiffy Lube, 4                                 long-term versus short-term
          John Deere, 4                                       contracts, 89-93
                                                        minimizing conflict, 199-200
          Kentucky Fried Chicken (KFC)                  monitoring systems, 202-203
            controlling sources of supply, 86           passive ownership, 80-82
            history of franchising, 7                   profit motive, 200-201
          Krispy Kreme, 13                              royalty payments, 88
                                                        termination rights, 85-86
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              228                                                                       INDEX

              market saturation, international          net worth requirements, selecting
                      expansion strategies, 169                 franchisees, 196-197
              master franchising, 124-127               new franchisors and company-owned
                and international expansion                     outlets, 159-160
                      strategies, 169                   number of outlets, 45-47
              material changes to franchise
                      systems, 180
              mature franchising systems and
                      company-owned outlets,            O
                      161-162                           Oma, 167
              maximizing profits versus maximizing      outlet concentration, level of, 45-47
                      sales, 44-45                      outlet operators. See franchisees
              McDonald’s                                overseas expansion. See international
                business format franchising, 4                  expansion strategies
                buying back franchised outlets, 161     ownership
                exclusive dealing, 87                     company-owned outlets
                expansion rights, 132                        expansion strategies, 158-163
                franchise fees, 143                          which outlets to franchise and
                   versus royalty rates, 151                    which to own, 164-165
                history of franchising, 7                 passive ownership, 80-82
                international expansion
                      strategies, 170
                local market knowledge, 11
                long-term versus short-term             P
                      contracts, 92                     passive ownership, 80-82
                physical locations of businesses, 10    payments. See royalty payments
                product development, 146                PepsiCo
                profit motive, 192                         litigation between franchisors and
                royalty rates, 150                                franchisees, 47
                selecting franchisees, 195                 return on investment, 38
                writing detailed contracts, 84          performance measurement,
              measuring performance. See                          appropriateness of
                      performance measurement                     franchising, 18-19
              membership in IFA (International          physical locations of businesses,
                      Franchise Association), 184-186             appropriateness of
              Merry Maids, 55                                     franchising, 9-11
              minimizing conflict, managing             Physicians Weight Loss Centers of
                      franchisees, 199-200                        America, 115
              Mister Money, 94                          Pizza Hut
              Money Mailer, 82                             exclusive dealing, 87
              monitoring systems, managing                 innovation, 60
                      franchisees, 202-203                 return on investment, 38
              moral hazard, 33                          policies. See management policies
              multiunit franchising                     pricing strategies, 141-142, 209
                passive ownership, 80-81                   franchise fees, 142-145
                territorial strategies, 124-131            relationship between franchise fees
                                                                  and royalty rates, 151-152
                                                           royalty rates, 146-151
                                                        product development, cost of, 146
              N                                         product franchising, 4
              national advertising, 94-98               product innovation, disadvantages of
              National Federation of Coffee                       franchising, 59-61
                      Growers, 167                      profit margin, appropriateness for
              negotiating discretion, appropriateness             franchising, 71
                      of franchising, 11
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          INDEX                                                                          229

          profit motive, 27                            S
            managing franchisees, 200-201
                                                       sales
            recruiting franchisees, 192
                                                          avoiding under-reporting, 88
          profits
                                                          increasing, 26
            excess profits, paying to franchisees,
                                                          royalties on, 147
                  88-89
                                                          versus profits, 44-45
            royalties on, 147
                                                       sales force, recruiting franchisees,
            versus sales, 44-45
                                                                 193-194
          proprietary advantage, appropriateness
                                                       sales growth limitations and
                  for franchising, 70
                                                                 appropriateness of
          psychological profiling, selecting
                                                                 franchising, 9
                  franchisees, 197-198
                                                       Scott’s Hamburger Hut, 151
                                                       screening franchisees. See selecting
                                                                 franchisees
          Q-R                                          Seattle’s Best Coffee, 168
                                                       selecting franchisees, 24-25,
          Radio Shack Select, 108                                194-198, 210
          rapid growth, importance of, 30-31              industry experience, 195-196
          real estate services, support for               net worth requirements, 196-197
                    franchisees, 114-118                  psychological profiling, 197-198
          recruiting franchisees, 190-194, 210            staged screening, 198
          reducing costs, 27                              startup experience, 196
          registration laws, 179-182                   Service Master Clean, 99
             list of states, 179                       shirking, 26
          relationship laws, 182-183                      and area development
             list of states, 179                                 agreements, 129
          replicable business concepts. See            short-term contracts versus long-term
                    standardization of products/                 contracts, 89-93
                    services                           Singer Sewing Machine Company, 6
          return on investment (ROI), advan-           Singer, Isaac, 6
                    tages of franchising, 37-38        site-selection assistance, 115-116
          right to cure (termination of franchise      Snappy Tomato Pizza, 197
                    contracts), 182                    staged screening, selecting
          right to expand, 131-133                               franchisees, 198
          risk of investment, appropriateness of       standardization of products/services,
                    franchising, 16-17                           appropriateness of
          risk sharing, advantages of franchising,               franchising, 12-13, 70-72
                    36-37                              Starbucks
          Robin’s Donuts, 148                             international expansion
          ROI (return on investment),                            strategies, 168
                    advantages of franchising,            litigation between franchisors and
                    37-38                                        franchisees, 47
          royalty payments                             startup experience, selecting
             enforcing, 88                                       franchisees, 196
             versus value of franchisor services, 48   state law regarding franchising,
          royalty rates, 146-151                                 178-183
             relationship with franchise fees, 151-       registration laws, 179-182
                    152                                   relationship laws, 182-183
                                                       statistics on franchising, 1-3
                                                          contract length, 90
                                                          franchise fees, 142
                                                          national advertising funds, 95
                                                          royalty rates, 148
                                                          when to first franchise, 157
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              230                                                                           INDEX

              stock options, 28                         U
              structural changes, disadvantages of
                                                        UFOC (Uniform Franchise Offering
                       franchising, 58-59
                                                               Circular), 7, 176-177
              subfranchising, 129-131
                                                        under-reporting sales, avoiding, 88
              Subway Restaurants
                                                        undercapitalized franchisors, 180
                 business format franchising, 4
                                                        underinvestment
                 franchise fees, 143
                                                          in advertising, 51-52
                 training requirements, 14
                                                          disadvantages of franchising, 55
              supply sources, controlling, 86
                                                        Uniglobe Travel, 4
              support for franchisees, 105-106, 208
                                                        USA Baby, 73
                 amount to provide, 114
                 centralized services, 112-113
                 communications, 113
                 field operations evaluation, 111-112   V
                 financing assistance, 118-119
                 real estate services, 114-118          Valpak Direct Marketing, 110
                 training opportunities, 106-111        valuable system, appropriateness of
              Sylvan Learning Centers, 70                       franchising, 68-71
                                                        value of franchisor services versus
                                                                royalties paid, 48

              T
              Taco Bell, 161                            W-Z
              Tastee Freez
                 geographic expansion strategies, 167   Wal-Mart, 94
                 history of franchising, 7              Wendy’s
                 termination rights, 86                   business format franchising, 4
              termination of franchise contracts,         master franchising, 125
                       53-55                            writing detailed contracts, 83-85
                 relationship laws, 182-183
              termination rights, 85-86
              territorial strategies, 123-124,
                       166-167, 208
                 complementary policies, 136
                 exclusive territories, 133-136
                 expansion rights, 131-133
                 multiunit franchising, 124-131
              trade secrecy, disadvantages of
                       franchising, 56-57
              trademarks, importance for brand
                       names, 70
              training opportunities, 106-111
              training requirements, appropriateness
                       of franchising, 13-14, 74-75
              transaction costs, disadvantages of
                       franchising, 49-57
              transferable concepts, appropriateness
                       for franchising, 72-75
              Trimark, 80
              turnover rate of franchises, 53-54

				
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