Franchising and Information Technology: A Framework

Abstract

According to Justis and Judd (1998), franchising is defined as “a business opportunity by which the owner (producer or distributor) of a service or a trademarked product grants exclusive rights to an individual for the local distribution and/or sale of the service or product, and in return receives a payment or royalty and conformance to quality standards. The individual or business granting the business rights is called the franchisor, and the individual or business granted the right to operate in accordance with the chosen method to produce or sell the product or service is called the franchisee.” Although the business of the franchisor is usually larger than the “satellite small businesses” of the franchisees, most franchisors manage mostly small and medium-size enterprises (Stanworth, Price, and Purdy, 2001). The U.S. Small Business Administration (SBA) recognizes this fact and sponsors various seminars in franchising, for example, business plan and raising capital, through regional Small Business Development Centers (Thomas and Seid, 2000). In addition, SBA sets up programs specifically designed for franchises (for example, Franchise Registry Web site: www.franchiseregistry.com) to streamline the review process for SBA loan applications (Sherman, 1999) and provide special incentives for franchisees to open locations in economically depressed areas (Thomas and Seid, 2000).