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AFFILIATION FRANCHISES

Guest post by: Kenneth Franklin

Article Overview: AFFILIATION FRANCHISES

AFFILIATION FRANCHISES

A relatively new and fast growing franchise relationship that you may have heard about is an affiliation franchise. Affiliation franchising began with real estate broker franchise programs in the early 1970’s and has spread to a number of other services (e.g., insurance brokers, financial, painting and decorating, travel agencies, used car dealers, home remodeling and accounting.)

Affiliation franchising involves the organizing of independent businesses under the umbrella of a franchise system. The franchisor gains the expertise of an experienced, established businessman, and the former independent gains a national identity and system of doing business, as well as advertising, purchasing, research and development and other services. Perhaps one of the key benefits for both franchisor and franchisee is that affiliation franchising speeds expansion since little or no start-up time or expense is required.

The franchisee adopts the service mark of the franchisor as a trade identity, though in some affiliation franchise programs, the franchisee retains his or her original trade name as a secondary or even predominant trade identity. He further agrees to conduct the business according to the franchisor’s specifications, standards and operating procedures and to pay fees to the franchisor. However, affiliation franchisees may resist franchisor control more than traditional franchisees in the early phase of their relationship.

For his part, the franchisor will typically furnish training, purchasing and advertising services. And it is precisely these economies of joint purchasing, advertising under a common trade identity, and the availability of specialized services at lower costs that motivate an independent business to become a franchisee.

However, businessmen that affiliate may also have defensive reasons: they may need to become part of a franchise system in order to compete with national service businesses. For example, insurance brokerage is a business with large, expanding national companies acquiring an increasing share of the market for insurance brokerage services. A number of affiliation franchise programs for insurance brokers have emphasized the need of independent insurance brokers to join a franchise system that can furnish sophisticated services and national identity and prevent further erosion of the market share of the independent brokers.

Another future example involves the thousands of small banks and savings institutions that are likely to fear the loss of market share and join franchise programs because banks and other financial service businesses are becoming national companies in the United States. Also, professional services (e.g., law, medicine, dentistry, accounting, architecture and engineering) may be the next subjects of affiliation franchising programs, since formidable regulatory barriers are slowly falling.

Remember, together everyone achieves more!

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Article Tags: AFFILIATION, FRANCHISES, franchsing



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