We have been required to do a research on franchising of Starbucks Coffee in Malaysia. Below is our report on it.
The term franchise originated from a French word, meaning “free from servitude.” A franchise can be defined as a legal agreement in which an owner (franchisor), agree to grant rights or privileges (license) to someone else (franchisee) to sell the products or services under set specific conditions.
Speaking of franchises, it is usually referring to business format franchises. Such a franchise is essentially a business clone. But there are many varieties of business arrangements within a franchise system. According to a publication by IFA (International Franchise Association) Educational Foundation, all of those arrangements can be divided into two major groups which are product distribution & business format.
Product distribution franchises simply sell the franchisor’s products and are supplier-dealer relationships. The dealer (franchisee) identifies with the supplier (franchisor) through the product line and to some extend with its trademark. Franchisees are granted the rights to distribute a franchisor’s products within a specified territory or location. This type of franchising dominates the franchise field, accounting for an estimated 70.2% of all franchise sales during 1990 (A. Khan, 1992).
Starbucks Coffee falls under category of business format franchises. Business format franchises involve a complete business format rather than a single product or a trademark, it is a relatively new concept of franchising and is characterized by an ongoing business relationship between franchisor and franchisee. Not only includes product, service, and trademark but business format franchises include the entire business concept. From m ...