A major firm recently converted from a fully integrated vertical marketing syste

Question

A major firm recently converted from a fully integrated vertical marketing system to business format franchising. In setting price, store hours, and personnel policies, it is important that the franchisor recognize that ________.

franchisees have total freedom to set and implement all retail strategies as they see fit it can control franchisees through constrained decision making to receive higher profits from the sale of all goods and services in general, franchisees should be treated as owners and not as employees it can control franchises through threatening franchise termination due to fair practice laws

Explanation / Answer

Answer is - franchisees have total freedom to set and implement all retail strategies as they see fit.

Franchising is when a firm can provide the rights to use its name as well as its facility layout as well as intellectual property rights etc. to another firm which gains advantage of the parent firm. It is a kind of licensing where the franchisee firm will have greater control compared to licensing. There will be a franchisee fee involved.

Franchisee however has the freedom to choose the retail strategies without tinkering the product, concept and design.

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