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The IUP Journal of Managerial Economics
Optimizing Franchising Investment Decision Using Electre and Rompedet Methods
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This paper dwells upon the problem of investments in the franchising system seen from a `pure technical' point of view and it tries to identify new ways to apply some methods and techniques used in adopting optimum solutions in businesses. It resorts to two distinct methodsthe Electre method (elaborated by French specialist Bernard Roy and considered as one of the most efficient methods of adopting multi-criteria decisions in conditions of certainty) and Rompedet method (an original product of the Romanian management school)in order to solve the decisional situation described here. As a consequence, the problem of optimizing the decision regarding the selection of a business out of the available franchise opportunities can be solved accordingly by both the methods described in this paper. However, it is necessary for the decisional situation presented here to reduce or to even eliminate (in case this could be possible) the subjectiveness of decisional factors in relation to the appraisal of alternatives.

 
 
 

The initial systems of franchising came to prominence in Great Britain during the 18th century and they were used in the brewing field. It refers to the methods of practicing and using another person's philosophy of business, products and trademarks.

The franchising system, is regarded as a strategic alliance that encourages a business in which both partners have benefits on condition that they sign a franchising agreement. In America, the franchising systems continued, especially after the Second World War, when most of those who had returned from the war were finding new ways to attain financial success. Even though, the greatest disadvantage of this business model was, at that time, the lack of experience of both the partners, especially in the distribution field, traders with a certain economic power started distributing their products and know-how, and thus, they started franchising.

Due to favorable economic conditions for the development of this system and the high degree of congruency with the enterpriser and the small and medium size enterprise, at the beginning of the 1990s the franchising system generated in the US, 10% of the gross domestic product. While in the year 2010, the estimates provided by the International Franchise Association reveal that the sales of companies that use this business model, will amount to approximately $250 bn.

Over the time, the term `franchising' has been defined in various ways, according to the point of view and the field it was used in (Costea, 2002). The easiest definition is that franchising is a business system in which the franchiser grants the independent operator, called the beneficiary or the franchisee, the right to distribute its products, services, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee.

 
 
 

Managerial Economics Journal, Investment Decisions, Rompedet Methods, Romanian Management School, Franchising System, Gross Domestic Product, Business Model, Business System, Decision Making Process, Investment Systems, Electre Method.