How does the concept of franchising work and why do so many companies do it?

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I was watching undercover boss and in the episode the CEO was unhappy with the work performance of an employee but couldn’t fire her. Isn’t the CEO the boss and above the manager of the store?

In: Economics

3 Answers

Anonymous 0 Comments

Basically when you franchise a company, you sell the brand of your company to someone else who wants to open a business. Mcdonalds is an example, they don’t own every store. What happens is that soemone goes to mcdonalds and franchises a store. This means that they can call the restaurant mcdonalds,use the logo, and sell big macs. They get advertising, training, access to suppliers and mcdonalds helps them set up and run the restaurant. In exchange, you pay them an upfront fee as well as a portion of profits. But mcdonalds doesn’t actually run the store. They don’t hire or fire the employees, or set the shifts that people work or anything related to that. The person who bought the franchise does all that. So the CEO of mcdonalds might not be able to fire an employee that’s not doing well, the franchisee has to.

Franchising your company allows you to expand very fast and for cheap, but you do give up some control over your company. it’s part of what let mcdonalds to have over 30,000 locations while In-n-out, a non franchised regional burger chain based in california, has under 400 despite opening their first location the same year.

Anonymous 0 Comments

1. Reality shows are 100% staged.
2. CEOs have varying levels of authority within their companies. Not all CEOs have the authority to terminate an employee.
3. Franchise businesses are independently owned by the franchisee.

A franchise owner agrees to the parent company’s rules, and pays for the right to use the trademarks, recipes, processes, etc. But he operates the franchise within those rules as he sees fit. Employees at your local McDonald’s don’t work for McDonald’s Corporation, they work for Jones Fast Food LLC (DBA McDonald’s), the franchisee.

Anonymous 0 Comments

* Instead of being a general distributor that sells things like frozen hamburgers to whoever, they allow others to open stores with their name and then sell all that stuff directly to them.
* This allows them to:
* Set the prices
* Make the rules about how much stuff each restaurant has to buy every month/quarter.
* Avoid having to pay for things like healthcare and retirement accounts for thousands of employees since they don’t technically employ the people working in the restaurant.