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88 Cards in this Set
- Front
- Back
Customer Service
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The set of activities and programs undertaken by retailers to make the shopping experience more rewarding for their customers.
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Customized Customer Service
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-Greater benefits to customers
-Greater inconsistency -Higher cost -Hard to measure and maintain |
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Standardized Customer Service
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-Lower cost
-High consistency -Meets but does not exceed expectations |
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Role of Expectations of Customer Service
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-Based on prior experience, knowledge
-Vary by store type |
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Customer Delight
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-Customer receives unexpected services
-A positive service experience -Results in high level of customer satisfaction |
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Customer Expectations
> Perceived Service |
= dissatisfaction, bad service
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Customer Expectations
< Perceived Service |
= satisfaction, good service
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Mystery Shoppers
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Amateur sleuths used to objectively (unemotionally) gauge service
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National Retail Federation:
Retailers with Best Customer Service |
1. L.L. Bean
2. Overstock.com 3. Zappos 4. Amazon 5. Lands’ End 6.Newegg 7. JC Penney 8. QVC 9. Coldwater Creek 10. Nordstrom |
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Service Recovery Effort
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1. Listen to the Customer
2. Provide a Fair Solution (distributive, interactional, procedural) 3. Resolve the Problem Quickly |
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Customer Relationship Management
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A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers.
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Three Components of Customer Loyalty
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1. Committed to purchasing merchandise and services from a retailer
2. Resist efforts of competitors to attract the loyal customer 3. Emotional attachment to retailer -Personal attention -Memorable positive experiences -Brand building communications programs |
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Steps in CRM Process
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1. Collect Customer Data
-Learning 2.Analyzing Customer Data and Indentify Target Makret 3.Developing CRM Programs -Action 4. Implementing CRM Programs |
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Collecting Customer Data Considerations
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-Types of Information in the Customer Database
-Approaches for Collecting Information -Privacy Concerns |
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Customer Database Information Types:
History of Purchases |
Purchase date, price paid, SKUs bought, whether or not the purchase was stimulated by a promotion
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Customer Database Information Types:
Customer contacts by retailer (touch points) |
Visits to web site, inquires to call center, direct mail sent to customer
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Customer Database Information Types:
Others |
-Customer preferences
-Descriptive information about customer -Customer’s responses to promotions |
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Approaches for Collecting: Customer Information
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1. Ask for identifying information
-Telephone number, name and address 2. Encourage use of frequent shopper cards (loyalty programs) 3. Link checking account number and/or third party credit cards to customer |
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Benefits to Customers for Offering Information
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-Discounts
-Special Treatment -Personal Attention |
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Risks to Customers for Offering Information
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-Disclosure of Information
-Unwanted Sales Contacts |
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Privacy Rights
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The Constitution does not specifically mention a right to privacy.
However, Supreme Court decisions over the years have established that the right to privacy is a basic human right, and as such is protected by virtue of the 9th Amendment. |
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FTC Guideline for Fair Information Practices:
Customer Control Over Collection |
-Choice/consent
~Opt-in and opt-out options -Access/participation ~Customer able to confirm accuracy |
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FTC Guideline for Fair Information Practices:
Customer Control Over Use |
-Notice and awareness
~comprehensive statement about information storage, manipulation, and dissemination -Integrity/security ~Controls for theft and tampering |
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FTC Guideline for Fair Information Practices:
Enforcement |
Mechanism to insure compliance
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Data Mining
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technique used to identify patterns in data
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Analyzing Customer Data
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-Data Mining
-Market Basket Analysis -Identifying Market Segments -Identifying Best Customers |
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Market Basket Analysis
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Data analysis focusing on the composition of the customer’s market basket
–what items are bought at the same time. |
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Uses for Market Basket Analysis
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-Adjacencies for displaying merchandise
-Joint promotions |
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Identifying Best Customers
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-Estimating Lifetime Value
-Classifying customers by Recency, Frequency, and Monetary value of purchases (RFM Analysis) |
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Analyzing Customer Data
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-Data Mining
-Market Basket Analysis -Identifying Market Segments -Identifying Best Customers |
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Market Basket Analysis
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Data analysis focusing on the composition of the customer’s market basket
–what items are bought at the same time. |
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Uses for Market Basket Analysis
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-Adjacencies for displaying merchandise
-Joint promotions |
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Identifying Best Customers
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-Estimating Lifetime Value
-Classifying customers by Recency, Frequency, and Monetary value of purchases (RFM Analysis) |
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Customer Retention Programs
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-Frequent Shopper Programs
-Special Customer Services -Personalization ~1 to 1 Retailing -Community |
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Elements in Effective Frequent Shopper Programs
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-Tier Based on Customer Value
-Offer Choices of Rewards ~Non-monetary incentives -Reward all Transactions -Transparent and Simple |
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Issues with Effective Frequent Shopper Programs
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-Expense
-Difficulty in Making Changes -Impact on Loyalty Questionable -Easily Duplicated – Difficult to Gain Competitive Advantage ~Need to offer “invisible” benefits |
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Converting Good Customers to Best Customers
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-Cross-selling
-Add-on selling |
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Implementing CRM Programs
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Systems,databases
+ Close coordination between departments = shift in orientation from product centric to customer centric |
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Value
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Perceived Benefits/Price
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How can retailers increase value and stimulate sales?
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Increasing Benefits or Reducing Price
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4 Factors Retailers Consider when Setting Price
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-Price Sensitivity
-Competiton -Cost -Legal Contraints |
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Price Sensitivity
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When price INCREASES sales can decrease as fewer customers feel the product is of good value
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Factors That Affect Customer’s Sensitivity to Price:
(-) |
-Customer Income
-Need for the Product |
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Factors That Affect Customer’s Sensitivity to Price:
(+) |
-Availability of Product from Competitors
-Frequency and Amount Spent on Product |
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Types of Price Discrimination:
First Degree |
-Set unique price for each customer equal to customer’s willingness to pay
~Auctions, Personalized Internet Prices |
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Types of Price Discrimination:
Second Degree |
-Offer the same price schedule to all customers
~Quantity discounts ~Coupons ~Markdowns ~Early Bird Special ~Over Weekend Travel Discount |
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Types of Price Discrimination:
Third Degree |
–Charge different groups different prices
~Kids Menu ~Senior Discounts |
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Reasons for Taking Markdowns
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-slow-moving, obsolete, uncompetitively priced merchandise
-Increase sales and profits through price discrimination -Generate cash to buy better selling merchandise -Increase traffic flow and sale of complementary products generate excitement |
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Coupons
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Documents that entitle the holder to a reduced price or X cents off a product or service.
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Purpose of Coupons
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-Reduce price to price sensitive customers who will spend the effort to clip coupons
-Induce customer to try products for first time -Convert first time users to regulars -Encourage large purchases -Increase usage -Protect market share |
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Rebates
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Money returned to the customer based on a portion of the purchase price.
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Rebates-Retailer Prospective
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-More advantageous than coupons since they increase demand, but retailer has no handling costs.
-Manufacturers like rebates because: ~Many customers don’t redeem. ~They can offer price cuts to customers directly |
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Everyday Low Prices
(EDLP) |
-Charge the same price all the time
-Set prices between regular non-sale price and deep discount sale prices of a high/low pricing competitor. -EDLP retailers typically still have some sales. -The Wal-Mart Effect (Fishman Video) |
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High/Low Pricing
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-Regular prices are higher than EDLP competitors, but merchandise frequently on sale at lower prices.
-Most store use this |
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Initial Markup
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-retail selling price initially placed on the merchandise less cost of goods sold
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Maintained Markup
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-Actual sales (markdown price) that you get for the merchandise less cost of goods sold
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Breakeven Point
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Fixed Cost/(Unit Price-Unit Variable Cost)
-How much do you need to sell to cover your cost exactly? |
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Legal Contraints of Pricing (6)
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-Price Discrimination
-Predatory Pricing -Bait and Switch Tactics -Resale Price Maintenance -Horizontal Price Fixing -Scanned Versus Posted Prices |
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How Can Retailers Reduce Price Competition?
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-Develop lines of private label merchandise
-Negotiate with national brands manufacturers for exclusive distribution rights -Have vendors make unique products for the retailer |
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Supply Chain Management
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The integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers.
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Strategic Importance of Supply Chain Management:
Retailers |
-Opportunity to Increase Revenues and Reduce Costs
~Transportation Costs ~Inventory Holding Costs |
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Strategic Importance of Supply Chain Management:
Customers |
-Improves Product Availability
~Fewer Stockouts ~Tailored Assortments |
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Return on assets
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=Net profit margin x Asset turnover
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To Improve Return on Assets
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Efficient Supply Chain Management --> Higher Asset Turnover
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Supply Chain Management
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The integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers.
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Strategic Importance of Supply Chain Management:
Retailers |
-Opportunity to Increase Revenues and Reduce Costs
~Transportation Costs ~Inventory Holding Costs |
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Strategic Importance of Supply Chain Management:
Customers |
-Improves Product Availability
~Fewer Stockouts ~Tailored Assortments |
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Return on assets
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=Net profit margin x Asset turnover
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To Improve Return on Assets
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Efficient Supply Chain Management
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Electronic Data Interchange (EDI)
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-the computer-to-computer exchange of business documents between retailers and vendors
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Information Flow
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1. When customer makes a purchase, sales associate scans UPC code on merchandise and customer credit card/loyalty card
2. Information about purchase is transmitted from POS terminal to the buyer/planner. 3. Information about purchases are aggregated by buyer/planner and sent to distribution center and vendor 4. Buyer/planner communicates with vendor and places a purchase order to re-supply stores. 5. Buyer/planner notifies distribution center about incoming orders and how they are to be distributed to stores 6. Store managers inform distribution center about receipt of merchandise and coordinate deliveries |
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Radio Frequency Identifiers
(RFID) |
Metal tag (about the size of a pin head) that emits an electronic signal, imbedded in products
-System can keep track of thousands of radio tags from hundreds of yards away (locate misplaced products; deters theft; replaces bar codes) |
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Logistics
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The part of the supply chain that plans, implements, and controls the efficient, effective flow and storage of goods, services and related information.
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Reverse Logistics
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the flow of returned merchandise
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Physical Flow of Merchandise
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-Merchandise is sent from vendor either to the retailer’s distribution center or directly to store.
-Retailer send merchandise from its distribution center to its stores. |
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Advantages of Using a Distribution Center
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-More cost effective
-More accurate sales forecasts -Less merchandise in the individual store, thus a lower inventory investment system-wide. -Less out-of-stock |
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When to Use Distribution Centers
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-Unpredictable merchandise sales
-Frequent replenishment required – high number of units sold per day -Items shipped to store in less than full case quantities -Many retail outlets that are not concentrated in one area |
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When to Use Direct Store Delivery
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-Retailer has only a few outlets
-Many retail outlets are concentrated in metro areas yielding increased efficiency of direct store delivery -Important to get merchandise in store quickly ~Fashion - first to have latest video game ~Merchandise perishable - produce |
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Logistics Strategy-
Pull |
Merchandise shipped to stores based on sales and inventory levels in the stores
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Logistics Strategy-
Push |
Merchandise shipped to the stores based on forecasted sales rate
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Bogus Return Schemes
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-Renting / Wardrobing
-Shoplisting -Box stuffing -Price arbitrage |
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Retail Store Ownership
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-Independent stores (entrepreneurs)
-Corporate Retail Chains -Franchising |
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Franchisee
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-Pays up front fee paid to franchisor (franchise fee)
-Pays monthly royalties to franchisor based on sales volume (on-going royalty fee) |
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Franchisor
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-Provides use of the trademark
-Helps locate and build the store -Trains franchisee -Monitors quality control -On-going support -Does all the advertising, develops systems and products -Territory exclusivity granted |
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Questions to Ask Franchisor
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-Costs
-Average sales/profits per franchise -Financing -Training & On-going Support -Advertising -Protective territory -Financial strength of Franchisor -Site selection assistance |
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Franchise Law:
FTC’s Franchise Rule |
-Requires franchisors to supply a full disclosure of the information a prospective franchisee needs in order to make a rational decision about whether or not to invest.
-A “cooling-off” period -Uniform Franchise Circular Offering (UFOC) ~A disclosure document containing extensive information about the franchise. ~To be provided at least 10 days prior to signing any contract or the exchange of money -All contracts must be provided to prospective franchisee a minimum of 5 days before the actual date of execution of the documents. |
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Risks of Franchise Ownership
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-Loss of control
-Binding contract -Branding/Image risk -Trends -Franchisor dictates introduction of new products -Labor -Working capital needed not well defined |
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Franchise Trends
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-Do-it-yourself meal preparation
-eBay Consignment Stores -Kids’ Specialty Services -Fitness and Weight Loss -Business Services -Home Improvement -Quick-Service Restaurants -Pet Businesses |