Monopolistic Competition and Food Franchising

One area of the United States economy where monopolistic competition is evident is food franchising. In food (1)_______ individuals pay an initial (2)_______ to a corporation for the privilege of using the corporation's name and selling the corporation's products.

The fast-food hamburger industry is an excellent example of franchising as monopolistic competition. Although three giant (3)_______ — McDonald's, Wendy's and Burger King — dominate the industry, thousands of small competitors exist throughout the nation. In addition, no single firm can affect supply or (4)_______. If McDonald's raises its prices too much, consumers will buy hamburgers from (5)_______.

To obtain a franchise from McDonald's, Burger King, or Wendy's, an investor must pay the corporation an initial fee that ranges from about $500,000 to more than $1 million. ln return, the investor receives training from the corporation as well as a restaurant and all of the capital needed to begin (6)_______. While the individual investor owns the business, the (7)_______ corporation sets prices, monitors quality, sells the (8)_______ all the equipment and food necessary to operate the business.

B. Answer the following questions:

1. What should an investor do to obtain a franchise?

2. What does an investor receive in return?

Ex. 4. Match the words from the text with their corresponding definitions.

1. boom	a. special skill or knowledge
2. outlet	b. money made on an investment
3. expect	c. to succeed in getting something
4. achieve	d. a big increase in business activity
5. licence	e. a shop that sells products made by a particular company
6. method	f. to control or be in charge of (an organisation)
7. expertise	g. a company or person who is competing against you
8. return	h. a document giving permission to make or sell something
9. rival	i. to think that something will happen
10. run	j . a way of doing something

Ex. 5. Look at the following words and complete the table.

Verb	Noun
expand __________________ __________________ predict forecast __________________ __________________ establish __________________	expansion_________ growth success __________________ __________________ exhibition consultant __________________ operator

Ex. 6. A UK franchiser describes how his business has evolved. Complete his account using words from exercises 1 and 2. Change the form of the words where necessary.

We negotiated our first franchise in 1984 with a young couple, Brian and Anne Webster, who opened a(n) (1)_______ in Cambridge which they still (2)_______ today. Following the success of this operation we contacted a franchise (3)_______ who was able to help us to select ten additional franchisees who then set up their businesses in some of the major towns in the South of England. Since then our company has continued to (4)_______ and today we are (5)_______ in more than 50 locations across the country. This year, for the first time, we attended the two European franchise (6)_______ in Utrecht and Paris, where we had some very promising interviews with local (7)_______ who were interested in taking out a (8)_______ for our master franchise. We have (9)_______ that by 1996 we will have a total of 120 shops across Europe and almost all of these will be owned by franchisees.

Ex. 7. A. Read the text. Replace the words in italics with their opposites from the box.

fierce investors share initial loyalty purchase catchy to enter convenience beyond

It is often easy to enter the fast-food hamburger industry. Individuals, for example, can set up their own independent hamburger stands without much investment. In addition, while purchasing a franchise from one of the big three corporate leaders is certainly not inexpensive, the (sale) (1) _______ is within the reach of many investors. To (leave) (2)_______ the national market as a competitor to McDonald's, Burger King, or Wendy’s, however, would require a(n) (final) (3)_______ investments of billions of dollars. Such huge investments are (within) (4)_______ the reach of almost all (borrowers) (5)_______.

As in most cases of monopolistic competition, the fast-food hamburger industry spends millions of dollars on advertising. In the mid-1980s, the advertising campaigns of McDonald’s, Wendy’s, and Burger King, which cost more than $500 million, became so (weak) (6)_______ that the news media labelled them the “Burger wars”. Each corporation’s campaigns stressed small differences in their products in order to build consumer (distrust) (7)_______ loyalty. In addition, the firms used (unpleasant) (8)_______ phrases and songs and comparisons of how their hamburgers were superior to those of the competitors to win a larger (the whole) (9)_______ of the market.

Franchising exists in many areas of the United States economy. Many restaurants, grocery stores, (unsuitability) (10)_______ stores, and fast-food outlets are franchise operations that allow individual investors with limited capital to set up a business.

B. Make a summary of the text “Monopolistic Competition and Food Franchising (see the text of ex. 3 and the text above).

Do any of these franchises operate in your city? Do you like going there?

Ex. 8. Janis Errickson, a Dunkin’ Donuts franchisee is talking about the “ingredients” for success in franchise business. Arrange the paragraphs in the right order and make a short summary of her talk.

Well, faith is certainly something that is very central to your relationship with your franchiser as they have certain standards that they want you to adhere to. You know, there are all kinds of rules that you have to respect so that there is continuity in the chain and you have to comply with them. So you must have confidence in the way that the whole business is being managed higher up because you are going to have to follow their formulas and that's easier if you can trust them and believe what they are saying

It's never easy to handle the money management of the business since there's a basic instability in the whole thing. You can never be sure of exactly how much you are going to sell ― it's unpredictable. You just can't guarantee that X number of people will come in and buy your product. But on the other hand you can be pretty sure that your bills will remain pretty constant so you need to be sure that yоu are constantly matching the two issues.

Well, I suppose that to be a successful franchisee you need a lot of dedication ― a lot of dedication to the job. I think I would say that preparation is the most important part of that because in this business you always need to be looking at the future of even the day, the week, the month. That's probably eighty percent of the job in my view.

I think that you really nave to be someone who has a certain vision. I mean long term vision, because when you start out you have to understand that you're not 'going to get rich tomorrow. The franchise business doesn't give you an immediate payback. So you have to be patient, and enjoy the daily success of the business in order to maintain it.

On the management side, I think the main thing is really to look after your employees because one of the main problems with the job is staffing, finding the right people to work with you. Let's face it. It's not a high-paying job so your staff have to feel that they are getting something else from working with you because if they don't enjoy doing their work then customers are not going to enjoy being with them.

Ex. 9. Translate into English.

Франчайзинг ― взаимовыгодное соглашение, которое заключают на основе контрактов типа “Фразчайз”, т.е. крупной «родительской» фирмы, которая даёт право мелкой частной фирме на протяжении определенного времени в специально отведенном месте организовать собственное дело. Франчайзинг ― это система ведения бизнеса, при которой компания-франчайзер продаёт индивидууму-франчайзи право вести бизнес, используя установленную систему или формат франчайзера, его торговую марку и репутацию. Это помогает начинающему предпринимателю правильно выбрать место, проект, получить кредит и торговать под торговой маркой “родительской” фирмы. За эти услуги предприниматель-франчайзи при заключении соглашения выплачивает вступительный взнос и отчисляет процент с оборота на счёт «родительской» фирмы, у которой он обязуется закупать необходимые для него товары и оборудование. Франчайзер также может потребовать от франчайзи выполнение некоторых правил, связанных с производством и поведением на рабочем месте. Франчайзи должен предоставлять регулярные отчёты по уровню продаж. Франчайзи ― это местный партнёр, знающий особенности местного рынка, что обеспечивает франчайзеру доход при минимальном риске. Франчайзер развивает свой бизнес, не имея проблем с наймом новых сотрудников и управлением персоналом.

Быть франчайзи ― это совсем не то же самое, что иметь своё собственное дело. Франчайзи могут лишиться своей франшизы, если не будут следовать политике компании. Руководство франшизой включает сочетание различных деловых умений, от работы с персоналом до отчётности и управления делами. Франчайзи должны быть готовы работать сверхурочно и выполнять любую работу. Они также должны регулярно посещать собрания с другими франшизодержателями для обмена идеями и опытом.