COMPLETE SCHOOL PROJECT TOPICS & MATERIALS :
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CHAPTER ONE

INTRODUCTION

1.0 Background to Study

In examining the effect of franchising on brand equity with emphasis on the soft drinks industry, it becomes obvious that often times, Growth, Profitability and Size are the three major variables that characterize a progressive organization. The vision and mission statement of most organizations reveal their aspirations towards achieving one or all of these variables.

According to Sawyer (1981), profits are the difference between revenue and costs and hence the relationship between revenue and size and between costs and size. Increase in the size of firm reduces overall profitability due to increase in costs. However, with franchising concept, growth can be achieved without necessarily increasing in size while profitability is greatly enhanced since there is no commensurate increase in costs with growth. The Coca-Cola brand typifies this phenomenon, as it would easily pass for a most outstanding successful brand globally. This paragon of brand culture is reputed to have only one factory in the whole world while adopting the concept of franchising for expansion: thereby gradually attaining the number one brand status infinitely beyond the limit of the one factory from where concentrates are sold to bottlers the world over to dilute, carbonize , bottle and make available to the consumers. This seemingly mysterious success and subsequent acquisition of such awesome brand equity of Coca Cola is largely attributable to its adoption of the franchising concept after Isaac Singer originated this concept and practiced it with his sewing machines.

Coca-Cola adoption of Singer’s franchising concept helped the company to achieve the huge brand equity status it possesses today. Franchising can be incurred or offered; while its application could be across geographical, cultural, economic, or social boundaries. Many products exist with awesome potentials for achieving such huge brand equity as Coca-Cola. The average product of any good or services would aspire toward achieving a wide acceptability and market share, which normally translates to a commensurate profitability.

The question now is how highly can franchising be recommended in achieving business expansion in the face of a prevailing difficult economic situation such as exists in Nigeria presently.

1.1 Statement of the Problem

In the midst of such prevailing economic recession, organizational growth and corporate performance becomes increasingly challenging. Entering new markets has been the major thrust in achieving organizational growth and franchising has proven to be one of the most attractive means of entering a new market for any product or brand. However, franchising has enhanced in brand the brand equity of some products while in some cases it has failed. The challenge is to determine the effect of franchising on brand equity so as to measure how applicable franchising would be in achieving corporate growth.

Franchising for brand equity in the soft drink industry most times are characterized by fake competitors. In other words imitation in brand of products in the soft drinks industry has in no small way reduced effective performance and profits, hence growth of firms in the industry. The dependency of effective franchising for brand equity on other marketing variables (e.g. promotion, pricing, production quality and wide distribution network) makes the determination of its contribution to organization’s profit inappropriate. Franchising can not work alone; it needs the other marketing variables to work. The fact that franchising is a form of business expansion