Page 448 - Foundations of Marketing

Retailing, Direct Marketing, and Wholesaling | Chapter 14 415

Table 14.2 Top U.S. Franchisers and Their Startup Costs

Rank Franchise and Description Startup Costs
1 Hampton Hotels $ 3,700,000 –$ 13,520,000
Mid-priced hotels

2 Subway $ 85,200 –$ 260,350
Submarine sandwiches and salads
3 Jiffy Lube Intl. Inc. $ 196,500 –$ 304,000
Fast oil change
4 7 -Eleven Inc. $ 30,800 –$ 1,500,000
Convenience store
5 Super Cuts $ 103,550 –$ 196,500
Hair salon
6 Anytime Fitness $ 56,300 –$ 353,900
Fitness center

7 Servpro $ 133,050 –$ 181,450
Insurance/disaster restoration and cleaning
8 Denny’s Inc. $ 1,180,000 –$ 2,400,000
Full-service family restaurant

9 McDonald’s $ 1,070,000 –$ 1,890,000
Hamburgers, chicken, salads
10 Pizza Hut, Inc. $ 295,000 –$ 2,150,000
Pizza, pasta, and wings
Source: “2013 Franchise 500,” Entrepreneur , www.entrepreneur.com/franchises/rankings/franchise500-115608/2013,-1
.html (accessed February 16, 2013).

The franchiser, therefore, has more available capital for
expanding production and advertising. It can also ensure, through
the franchise agreement, that outlets are maintained and operated
according to its own standards. Some franchisers do permit their
franchisees to modify their menus, hours, or other operating ele-
ments to better match their target market’s needs. The franchiser
benefi ts from the fact that the franchisee, being a sole proprietor
in most cases, is likely to be very highly motivated to succeed.
Success of the franchise means more sales, which translates into
higher income for the franchiser.
Franchise arrangements also have several drawbacks. The
franchiser dictates many aspects of the business: decor, menu,
design of employees’ uniforms, types of signs, hours of opera-
tion, and numerous details of business operations. In addition,
franchisees must pay to use the franchiser’s name, products, and
assistance. Usually, there is a one-time franchise fee and con-
tinuing royalty and advertising fees, often collected as a percent-
age of sales. Franchisees often must work very hard, putting in
10 - to 12 -hour days six or seven days a week. In some cases, iStockphoto.com /andipantz
franchise agreements are not uniform, meaning one franchisee
may pay more than another for the same services. Finally, the
franchiser gives up a certain amount of control when entering
into a franchise agreement. Consequently, individual establish-
ments may not be operated exactly according to the franchiser’s Subway is a franchise, so individual stores are owned and
standards. managed by the franchisee.

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