Agency and Franchising Essay Example | Topics and Well Written Essays - 500 words

Agency and Franchising - Essay Example Two types of retail business format are popular; agency and franchising. Agency or an agent can be broadly described as a person with an authority to represent another person, persons or corporation (called the Principal) (Brillinger, p214). The agent therefore, represents the principal in all the commercial transactions. It is important to understand that as the agent represents the principal, the principal, by default, becomes liable for all the acts of omission and commission of the agent. Even when the agent’s appointment may have pre-defined authority as given by the principal, the principal becomes responsible for all the leverages taken by the agent while conducting business on his behalf. The goods and services sold by the agent are owned by the principal, he is just the intermediary who acts on behalf of the owner of the goods and services. ‘By virtue of an agency, the seller contracts directly with the customer, who is seller’s customer, not that of agent’ (Ishani, 2007). The franchising is ‘a marketing system revolving around a two-party legal agreement, whereby the franchisee conducts business according to the terms specified by the franchisor’ (Longenecker, chapter 3). The process of ‘franchising’, therefore, has become popular in the emerging economy which presents wide scope for the parties, franchisee and the franchisor. The franchising format of business primarily comprises of licensing another person to run the business in a pre-determined format. The franchisor is able to expand his business and spread them in wider areas of operation in a relatively short time and with reduced capital cost. By facilitating goods and services to the franchisee, the franchisor is relieved of the pressures of day today operation and at the same time, he is able to control the appearance and operation of the franchisee