Page 447 - Foundations of Marketing

414 Part 5 | Distribution Decisions

Emerging Trends

Vending Machines Go High-Tech

Coming soon to a corner or cafeteria near you: the next High-tech vending machines can offer a lot of
generation of vending machines, wired with the latest information about the products they sell. For example,
technology for a fast, convenient, and fun experience. buyers can swipe a finger across the touch screen of a
Want to send a friend a free cola? If you’re near a Diji-Touch vending machine selling Kraft snacks to see
PepsiCo Social Vending machine, you simply pay for a can nutrition facts and a 360 -degree view of each item. For
or bottle and send a personalized text message to announce sheer entertainment, it’s hard to beat the Lay’s vending
the gift, including a redeemable code for the cola. If you’re machine in Buenos Aires: drop a raw potato into the
at the airport and realize that you forgot your camera or cell shoot, and watch as it gets washed, peeled, cut, cooked,
phone charger, check out the terminal’s Best Buy Express salted, and bagged—and a finished package pops out
electronics vending machine. Need Wi-Fi? You can go online of the machine. In reality, what customers see is a vivid
for free, even without buying anything, if you’re standing one-minute video reinforcing the idea that chips are
d
next to an Asahi soft-drink vending machine in Tokyo. made from real potatoes.

© iStockphoto.com/CRTd

Because vending machines need only a small amount of space and no sales personnel, this
retailing method has some advantages over stores. The advantages are partly offset, however,
by the high costs of equipment and the need for servicing and repairs.

LO 5 . Examine franchising and FRANCHISING
its benefits and weaknesses.
Franchising is an arrangement in which a supplier, or franchiser, grants a dealer, or franchi-
see, the right to sell products in exchange for some type of consideration. The franchiser may
receive a percentage of total sales in exchange for furnishing equipment, buildings, manage-
ment know-how, and marketing assistance to the franchisee. The franchisee supplies labor and
capital, operates the franchised business, and agrees to abide by the provisions of the franchise
agreement. Table 14.2 lists the leading U.S. franchises, types of products, number of franchise
outlets, and startup costs.
Because of changes in the international marketplace, shifting employment options in the
United States, the large U.S. service economy, and corporate interest in more joint-venture
activity, franchising is a very popular retail option. There are around 825,000 franchise estab-
lishments in the United States, which employ more than 9 million people across a variety of
24
industries. Franchises produce more than $ 8.2 billion of annual output.
Franchising offers several advantages to both the franchisee and the franchiser. It enables
a franchisee to start a business with limited capital and benefit from the business experience
of others. Franchised outlets are generally more successful than independently owned busi-
nesses. Generally speaking, franchises have lower failure rates than independent retail estab-
lishments. However, franchise failure rates vary greatly depending on the particular franchise.
Nationally advertised franchises, such as Subway and Burger King, are often assured of sales
as soon as they open because customers already know what to expect. If business problems
franchising An arrangement
in which a supplier (franchiser) arise, the franchisee can obtain guidance and advice from the franchiser at little or no cost.
grants a dealer (franchisee) Also, the franchisee receives materials to use in local advertising and can benefit from national
the right to sell products in promotional campaigns sponsored by the franchiser.
exchange for some type of Through franchise arrangements, the franchiser gains fast and selective product dis-
consideration tribution without incurring the high cost of constructing and operating its own outlets.

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