Case Study on Franchising

To what extent is a franchise opportunity a true reflection of what it is like to set up and run a business?

Setting up a business and setting up a franchise can be very similar; however there are a few differences that need to be taken into account when making a decision. When a franchisee buys the rights to set up their own franchise, they are buying rights to use the franchisor’s trademark and model. They therefore don’t have to come up with their own ideas for the business; the logo, product, trade name, equipment etc. are already provided. Apart from that, however, running a franchise is very similar to running an individual business. The franchisor controls the marketing and quality of the product (they don’t want their business to get a bad name); however it is up to the franchisee to conduct and organize their franchise in such a way that earns them a good profit. Therefore, it is a fairly good reflection of what it is to run a business, not so much set one up (idea-wise).

Use the Forbes site and the Business of Baseball site to do some research on the financial positions of the different baseball franchises in the United States and Canada. Using the data, suggest which teams are the most vulnerable to seeing their franchise sold to a rival bidder such as Portland Oregon.

A team like the ‘Tampa Bay Devil Rays’ is most likely to be sold to a rival bidder. They rank number 30 in the top 30 teams of the league, and are therefore not doing very well in their games. They are, however, doing well financially – they have an operating income of 27.2 million dollars annually (this is the third highest amount of the whole league). Therefore, a bidder would be more likely to buy them; it will earn them more income, and the fact that the team isn’t doing all that well sport-wise can also work to their advantage (sponsorship, reputation build-up, etc.).

Imagine a situation where the English soccer Premier League became the franchisor as in the case of MLB Inc. How might the Premier League seek to use this position to expand the growth of the ‘brand’? What implications would this scenario have for clubs in the League and outside it (i.e. those in the Championship?)

If the Premier League was to become a franchisor, it could easily expand by introducing teams from different nations, for example the United States or even Canada. Obviously, a more international presence would help its reputation just as it would help any other business that went into franchising. They would also be able to earn much more profit if they were to introduce new teams/nations, as each team would (more then likely) have to pay some sort of royalty payment to the "brand".