Page 2: Benefiting from a franchise arrangement
Franchising is one of the most important ways of running modern business organisations. The franchisor grants to a franchisee the right to conduct business using their name in a particular area. For example, in Great Britain Coca-Cola and Schweppes Beverages Ltd is the company that holds the GB franchise with six bottling/canning plants. The franchisee will have the exclusive right to bottle and can the product within a specified geographical area and is given considerable support by the franchisor. The main advantage to the franchisor of setting up a franchise is that responsibility for producing the product is delegated to a dynamic local enterprise, determined to make a success of the venture because most of the profit will be retained by the franchisee.
The benefits to the franchisee are immense. Above all, they are able to manufacture widely known products, they have exclusive rights within a particular area and they are able to benefit from technical advice and support from the franchisor. Moreover, in the case of Coca-Cola, the franchisee is able to benefit from the sheer scale of the organisation, enabling them to purchase manufacturing equipment which is based on state-of-the-art technology at a lower price. It is not surprising that most of the world's leading bottling companies have become Coca-Cola franchisees. By participating in the franchise arrangement, they are able to bottle and sell the classic Coca-Cola drink to retailers and trade using the most popular and famous brand in the world today. The classic Coca-Cola drink consists of water and a mixture of sugar, caramel (which adds colour), phosphoric acid (which adds tartness), caffeine (a mild stimulant found in coffee and tea) and natural flavourings. The proportions of these ingredients in the Coca-Cola concentrate are a closely guarded trade secret, though all ingredients comply with the health laws of the countries where it is made and sold. The exact combination of these flavourings is known mysteriously as 'Seven-X' and the formula lies locked in a bank vault in Atlanta. It is said that only three people know the formula.
The Coca-Cola brand image is widely recognised throughout the world and has become a symbol of successful global marketing. The script for Coca-Cola has not changed since first written by Frank Robinson, book-keeper to the inventor of Coca-Cola, John Styth Pemberton. The Coca-Cola franchisee therefore has access to one of the most highly desired products and one of the most successful marketing distribution systems in the world.