| As John Naisbite the writer of "the Great Future" had predicted that being the most successful marketing concept, "Franchising" would be the third revolution of the retail industry following department stores and supermarkets and become the dominant business model in the 21st century. Franchising means that the frachisor and the franchisee reach an agreement in which the franchisor agrees to allow the franchisee to use the frachisor' s trademark, logo, product, patent, know-how or operation model and provide the franchisee with training management, promotional assistance and the ongoing support service and as his obligation under the agreement, the franchisee must pay such fees as franchise fee, royalty fee, training fee, advertising fee etc. Franchising first appeared in US in 1856 and soon became popular in the worldwide. In the late 1980s, it was brought to China by McDonald' s and Kentucky and attracted great attention from the government, investors and enterprises. The expos related to franchising have been held for many years and the number of franchised units has been greatly increasing.However, it has not been 20 years since China' s franchising firms operated andmany problems axe waiting to be solved, such as disputes concerned with the delivery time, the product quality and payment, among which I think the most urgent one is the financial difficulty for franchisees. If you have visited some franchising expos, you can find it is common that franchisors require 500,000 at least for any franchisee to open a franchising unit. As we know, it is difficult to obtain such a great amount of money without banks' loans. But like many Middle-Small Firms (MSFs) under the current financing system, franchised units almost have no chance to get financed.At present, many researches concerned with franchising center around such problems as franchise marketing, franchising logistics and the location choice of the franchised units and the research of franchising financing is still kept intact. So I would like to explore the field to offer some advice for franchising practice.The thesis is composed of four sectors. Firstly, I will introduce the concept of franchising, its characteristics, its required finance and its financing conditions. Secondly, the reasons for the financial difficulties will be given by analyzing both capital demand and supply of MSFs. Thirdly, advice on how to manage financing will be offered. Finally, practical methods to solve the financing problems will be suggested. Compared with the chain store operation, franchising is characterized with the following. The assets of franchisees are independent of the franchisors' and franchisors have no ownership of the franchised units. The franchisee has to assume sole responsibility for its operation including both enjoying profits and taking risks on its own. The franchisor and the franchisee are related to each other through the franchising agreement that spells out their respective rights and obligations. Generally speaking, the franchisee will pay the following items: franchising fee, royalty fee, promotional fee, advertising fee equipment purchase, the raw materials, the cost of land and the operation cost etc. The totaled cost will be easily over RMB500, 000, which is a great burden for any potential franchisee if it gets no external funds, especially from banks. But currently our country' s financing system is entangled with the following problems:1) The resources of fund supply are monopolized by the bank loans;2) The Big Four State-owned Banks provide too few loans to MSFs;3) The allotment of loans between different MSFs is unbalanced mostly at state-owned MSFs advantage;4) The financing funds from the internal and external firms are disproportioned and the ratio of debt to asset is too high;5) The capital market is almost closed to MSFs and they have no qualification of bond issuance.The main reason behind the financing difficulties for Franchised units is that they have the same disadvantages as MSFs. These can... |
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