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noun | fran•chis•ing | ˈfran-ˌchīz-ing
Franchising is the granting of a right by a franchisor to sell its goods or services to an individual or organization, a franchisee, in a particular area. Franchising is the gerund form (verbs used as nouns) just as licensing is the gerund form of the verb license.
Origin: from Anglo-French of franchir to free, also from franc free (see Merriam Webster)
verb (tr.v. used with object) | fran•chis•ing | ˈfran-ˌchīz-ing
to grant the right to sell a company's goods or services in a particular area. It is the progressive verb tense of franchise.It is a grant of authority, which is given by a franchisor for monetary gain, whether by giving the franchisor a franchise fee, royalty fees, marketing fees, product mark-ups, and more from a franchisee (a franchised business).
The term franchising is often erroneously used among business journals and trade associations to refer to franchisees, franchisors or both. As defined by the American Heritage Dictionary, franchising is when a party, the franchisor, "grants a franchise" to a franchisee.
Franchisors will naturally and understandably argue that franchising, the development of a franchise network, takes two to tango. In the act of granting a franchise, a buyer must be willing to pay for a grant of a franchise from a franchisor. But that leaves out the point that when the term franchising is used, the franchisor is the prime mover. The franchisor is the entity that sells and grants franchise rights, not the other way around.
Examples of how not to use the word "franchising"
Sometimes newspapers, business journals and trade associations use the term incorrectly. Here's a few wrong uses of franchising.
"I saw the potential franchising offered and applied for a management position with Domino's [a pizza store in the speaker's neighborhood]." - Indystar
"Franchising now accounts for 5% of Philippine GDP" - Manila Bulletin
It is highly unlikely that selling franchises accounts for 5% of the Philippine GDP. It is doubtful that the author meant that. Franchising also does not refer to the economic output of all franchised units and their vendors.
"Women are likely to look to franchising because of the flexibility and challenges it provides, a new survey has found. According to Mortgage Choice's Best in the Mortgage & Finance Industry report, potential female franchisees see the ability to control their own time and movements as the most important aspect of running their own business." - Broker News
Unfranchising or franchise termination
When a franchisor decides to remove or terminate the franchise license, they are in essence un-franchising.
There are all sorts of reasons to terminate the license. A franchisee may run a shoddy ship. A franchisor may cold-heartedly calculate that such small mom and pop franchise units are not its future and look for any excuse to terminate the franchise arrangement. But barring legal intervention, again, it is only the franchisor who can grant or ungrant, not the franchisee.
A company's franchising ability, which is sometimes merged into the word franchisability, is important to investors of franchised stores. Savvy stockholders would want to know the strength of a firm's franchising efforts. Some franchisors are gifted sellers of franchise licenses and can create considerable cash flowing into the firm through the payment of initial fees from lines of franchised store investors. Both stock investors and store unit investors would also need to know why a franchisor operationally would have difficulty retaining franchisees. They might also wonder why franchisors cannot better keep average Joes, or why the franchisor seems to have a propensity to sell franchises to franchise owners who have difficulty profitably operating a franchise.
A franchise buyer would also want to know if the franchisor is making money only on its franchising efforts—a bad sign— and whether the franchisor can profitably operate from profitable franchise stores that pay it royalty. Investors cannot make an intelligent decision to invest unless he or she has tangible financial evidence of the profitability of not just one store but the vast majority of franchises in a system.
Note: We have a category on Blue MauMau called "franchising". The intent was to discuss franchisor development issues. We tend to use it here to discuss franchisor issues. That category name will be re-thought.