But, getting into the entire retailing process requires huge capital and burdensome managerial responsibilities. Retrieved June 03, 2023, from https://www.wowessays.com/free-samples/benefits-of-franchising-essay-examples/. Decision making is expedited because the owner can make direct follow-ups on all occurrences at the business. The reason as to why this form of business is revolutionary in the corporate world is that, the corporate image and the awareness of the bland of the company selling the franchise is already there. Drawbacks of Being a Franchisee 10. Transportation costs are very high for imported goods. On the other hand, a franchisee wishing to sell his franchise can only do so with the approval of the franchisor. To start with, the swot analysis is defined. These are brand recognition, low risk to failure, easy set up, ready customer portfolio and easy to find financial . IvyPanda. An email with your password has already been sent to you! These are brand recognition, low risk to failure, easy set up, ready customer portfolio and easy to find financial support. Check your email! Before a start up establishes enough to command recognition by the customers, it may take many years of continued effort in advertising. Well email you the instructions on how to reset it. Prices dropped - now starting at just $8 per page! Scarborough, N. M. (2010) Effective Small Business Management an Entrepreneurial Approach. It has come to help the individual entrepreneurs to be in business for themselves but actually not for themselves. Advantages of franchising One of the merits of franchising is that most franchisees record impressive profits especially when managed effectively. The advantages for the franchisor. It analyses the best performing industries in the country, or may be in his state. Fifthly, franchisee does not encounter barriers to entry into new markets or industries. Don't use plagiarized sources. (2019, December, 07) Benefits Of Franchising Essay Examples. This however could at times be listed in the franchise disclosure document (FDD).but like said earlier it is not necessary. The franchisor needs to consider the socio-economic and political situation of the country as well. The code of ethics ensures that the business does not breach ethical behavior since this can have serious consequences in how the business relates to the market, consumer, and government authorities. An Introduction to Franchising. I am really satisfied with her work. (2022) 'Franchising: Advantages and Disadvantages'. (2019, December, 15) What Is Franchising Essay. By clicking Register, you agree to our Terms of Service The history of franchising can be traced back to the Middle Ages (476 A.D. 1453 A.D.) when kings granted franchises to specific people or groups to perform a certain type of commercial activity or hunt on their land. Franchisees gain numerous advantage when they purchase a franchise. An additional source of income is created through franchising. An email with your password has already been sent to you! and submitted before, Note! And theyll generate independent demand. It is like owning the business, but running it under the guidance of an expert. The business owner pays a fee or royalty in return. When starting a business or venturing into entrepreneurship, it is imperative for one to consider all options. Ben Ottewell of Gomez - David McMillin of Fort Frances Essays Examples, Music Distribution: More Service Oriented: A Top-Quality Essay For Your Inspiration, Privacy Typically, a company also requires the owner to purchase supplies from the company. Franchising is an important business decision for both the parties in franchising. In addition, reduced cost of advertising and operation expenses is enjoyed by a franchisor. You are free to use it to write your own assignment, however you must reference it properly. Franchising Subway Essay. New York: American Management Association. Most business experts agree that a franchise operation has a lower risk of failure than an independent business. The Benefits of Franchising One of the main benefits of franchising is lower risk. Firstly, franchising reduces business risk as the product or service offering and its system of delivery is already proven. A good franchise offers a total package that includes site selection, lease negotiation, personnel training, and store design. Published Dec 15, 2019. Franchising is a very effective model of business for an entrepreneur. It also takes care of difficulties with the employees. In case the franchisor goes out of the market, the franchisee is left like an orphan. A franchise is a business model the owner of a business concept also known as a franchiser grants the right to use the concept to another party also known as the franchisee. This closeness to the market also helps the small businesses to develop a personal relationship with the market. One can then chose short franchise so that if it does not work the franchisee can then chose to exit into other forms of business. However, franchising also has some potential downsides, including less control over decision making. ", "Benefits Of Franchising Essay Examples,". With increasing focus on liberalisation and removal of entry barriers by nations, international franchising is gaining popularity. There are many types of franchising. Policy. Word Count: 1907 Franchisors are increasingly having to be more and more selective in the adoption of franchisees with factors such as economic climate and the potential difficulty with growth playing key factors in the decision making process. Case Analysis of a Balanced Scorecard Approach, Journal Article Review: Initiating and Leading Change: A Consideration of Four New Models, Whether sport-related businesses need to franchise. The extent of involvement of the franchisor in the distribution of its goods depends on the type of franchise format used. Franchises have lower rates of failure. If the fee is too high, the franchise business may become unviable for the franchisee. To add more franchises, please uncheck selections in your request info basket. London: Wiley. Franchising is government by a set of regulations that need to be considered when making an investment decision. Depending on the terms of the franchise agreement and. Advantage of franchising - Subway In engaging a franchise business, one will face the pros and cons from the business they operate. Franchisee is the one who consumes trademark of the supplier and deliver the supplier's goods. the company from whom the franchisee is buying the franchise (Scarborough, 2010). The paper is divided into four parts. A good franchise offer training and support as owner will not know how to run Jiffy Lube or Subway without guidance. As such, this becomes a strategy beneficial to the franchisee since he is not faced with risks of making mistakes caused by doing guesswork in running the business. Print. As such, we can conclusively say that franchising is a revolutionary approach to business. WowEssays, Dec 15, 2019. However, buying a franchise of established hotels like Day Inn and Supper 8 will prove beneficial in establishing his hotel. The franchising is more prevalent in the restaurant industry (Hoffman & Preble, 2003). While an entrepreneur gets independence in this model, he or she is not adversely affected by the nuances of a start-up entity. According to Beshel (2001), franchising is an arrangement between legally independent entities which gives one party (franchisee) the right to market the products, services or trade name of the other party (franchisor) by paying fees for the rights. A country with very high illiteracy and poverty rates, lack of proper infrastructure and political unrest can never be a good investment location. So why would they be interested in a franchise, which stereotypically limits their ability to take risks and take full ownership? (2022) 'Drawbacks and Benefits of Franchising Essay'. It also brings brand identification among the potential markets. Southbank, Victoria: Cengage. Power and control in the franchise network: An investigation of ex-franchisees and brand piracy. 1. This can be insured by paying sales based royalty and requesting the franchisor for part investment. No spam, just good, helpful information for aspiring entrepreneurs. What Small Businesses Are Most Profitable. Selden, Andrew C., Gipson and Parker (2008). [Accessed June 03, 2023]. This allows the franchisee to have a piece of minds knowing that the company is steering the business in the right direction. Available from: https://www.wowessays.com/free-samples/benefits-of-franchising-essay-examples/, "Benefits Of Franchising Essay Examples." As such, the cost may be higher than one expects. Get help with 11% offusing code - GETWOWED, No, thanks! "Drawbacks and Benefits of Franchising Essay." This too including other support services is provided to the new entrants into the business world. Hunter, R. (2011). Some of the sources of income derived from franchising include sourcing private label goods, royalties and levies as well as franchise fees payments. Hence, it is better for a franchisor to have the franchisee own the franchise. January 23, 2022. https://studycorgi.com/franchising-advantages-and-disadvantages/. Because the franchise runs for a specific time and operates within a specific location, a franchisee can then aim at managing many of such locations. The weighing of both the merits and the demerits of the franchise has left us with the weigh inclined to the merits. Franchising has exhibited dramatic growth since it offers some significant advantages when compared to other distribution methods. The franchise also benefits the franchisee by allowing them access to a network of peers which normally comprises of other franchisees. Such a franchisee seeking to get into business can enlist the servicers of master franchisors who can then work to help the franchisee in obtaining rights to sub franchise in the location (Millmore, 2007). Take the Franchise.com app with you anywhere! In many ways, a lot of the work is already done for you with a. Secondly, franchisee benefits from the extensive brand recognition and customer awareness. Franchisors are becoming more and more scrutinising as the global economy declines. The franchisor does not manufacture the products in this model. Going hand in hand with this, a franchise already has an established brand name, quality of goods and service which have been standardized across the franchisors larger company, and national advertising programs from franchisors. Lastly, franchising requires a lot of permissions and approvals from the franchisor and other concerned regulatory bodies. Get help with 11% offusing code - GETWOWED, No, thanks! The execution of the rules that govern the franchising business is done at the state level, where each state is supposed to regulate its own franchising business by designing their respective disclosure requirements. In the 1850s, Isaac Singer started granting franchises for its sewing machines because he wanted to distribute his sewing machines to customers. However, if the industry is very competitive, looking for local vendors is a better proposition. Companies see franchisees as a source of capital. Need a custom essay sample written from scratch by gives the company assurance. Standardisation and Adaptation in Franchising, Pinkberry Frozen Yogurt Company's Foreign Entry Mode, How Corporate Leadership Controls Hotel Franchise, Business Communication in Dubai Franchising, Energy Entrepreneurship: Southern company, Expansion of Large Food Retailer into Emerging Markets, Nutrition information vs. consumer behavior. A major advantage of franchising is the marketing the franchisees business gets from advertising campaigns by the franchiser. This report is an attempt to compare the advantages and disadvantages of franchising which is one of the most known business model. Regardless of the payment method you choose for checking out, all transactions are safe and encryption-protected. Lansing, Kansas is a small city located along the Missouri River in Leavenworth County, Kansas. (2005) The International Business Environments of Franchising in Russia. International franchising also places company's name and presence in a global market. In the business world, there are many ways of getting into business. It is also prudent to mention that both the capital and earnings can be boosted at the same time due to the available opportunities. Potential markets are those that have demand for the product and where the companys product can be sold profitably. Hisrich, R.D., Peters, M.P. June 19, 2022. https://ivypanda.com/essays/franchising-essay/. The franchisor can also provide ongoing research and development so that new products and services will be made available to . In conclusion, therefore, though demerits of franchising are there, it remains to be an effective way of getting into business. This site uses cookies. It is quite popular in the marketplace. Most franchisors give the franchisee detailed training in order to ensure that they develop the required level of expertise to achieve profitability. This essay was donated by a student and is likely to have been used By Industry Automotive Franchises Beauty Franchises Beverages Franchises Business Opportunities Business Services Children Related Cleaning Franchises Computer & Internet Earth Friendly Education Franchises Financial Services Morgan 2 . It has come to help the individual entrepreneurs to be in business for themselves but actually not for themselves. The purpose of the paper is to highlight the importance of franchising and understand the factors that affect franchising decision of businesses. Dont know where to start? Motivated and Effective Management The local management of each franchised unit will be highly motivated and very effective. (2022, January 23). Trademark, Format, Organisation, Catalyst, Trade Name. Franchising may come with detrimental strings attached. Proceed if you agree to this policy or learn more about it. The you've inquired to will contact you shortly. The Benefits of Franchising: What are the Advantages to Being a Franchisee? An Introduction to Franchising. StudyCorgi. Not having to answer to a corporate boss is the dream of many and the flexibility that owning a business franchise creates provides this option. Copyright 2023 - IvyPanda is operated by, Continuing to use IvyPanda you agree to our, Drawbacks and Benefits of Franchising Essay, http://www.marcbowles.com/publications.html, How Companies Can Successfully Enter The French Fashion Industry. https://ivypanda.com/essays/franchising-essay/, IvyPanda. Following section discusses the importance of franchising in detail. Franchising, like any other business expansion plan . WowEssays. Distribution is one of the basic reasons for having franchisees. Hence, different countries have different regulations that pose different requirements for franchising and impact it differently. We use cookies to enhance our website for you. LaFranchi, Jane Woods. Essex: Pearson Education. January 23, 2022. https://studycorgi.com/franchising-advantages-and-disadvantages/. However, factors that affecting franchising decision for a franchisor will be different from the factors that affect a franchisees investment decision. This paper Franchising: Advantages and Disadvantages was written and submitted to our database by a student to assist your with your own studies. Little to no industry experience is necessary. Receive updates on the latest and greatest franchises and business opportunities delivered to your inbox each week. (2011) Strategic Management: Competitiveness and Globalization. Secondly, on-going marketing of your business is backed by the power of the established brand, and could be as simple as contributing a fee to a advertising fund that is driven by the franchisor. The company will usually provide a significant amount of assistance to the business owners in starting and managing the company. Although franchisees also have this advantage, they do not have the freedom to come up with unique structures when it comes to the distribution business. Franchised brands are usually well established and have good records of success. The companies can also take advantage of the local goodwill of the franchisee. WowEssays, 07 Dec. 2019, https://www.wowessays.com/free-samples/benefits-of-franchising-essay-examples/. While an affiliation format may be relevant for a real estate business, it cannot be relevant for a fast food chain like McDonalds. June 19, 2022. https://ivypanda.com/essays/franchising-essay/. For example, the franchisee might be forced to buy products from the franchisor. This is because some new business owners lack the required management knowledge to effectively lead their business in areas such as selling, finance, production, accounting, and human resource management. Additional materials, such as the best quotations, synonyms and word definitions to make your writing easier are also offered here. Order a unique paper from WowEssays right now! | | c. | Franchisees are often required to pay into a national or regional advertising fund. Additionally, one may be required to purchase the product in advance so that it can be delivered to the customers as the sales are made. They mention the role of franchising as a mode of distribution of goods and services, a method of business expansion and a catalyst to achieve other organisational goals, like vertical integration. As a matter of fact, there are several small-scale businesses that often fail even when the economic climate is favorable (Dant, 2008). The franchisor looks at its decision of franchising with a more global angle. It is a form of business by which the, Franchising A franchise, by definition is a legal agreement that allows one organization with a product, idea, name or trademark to grant certain rights and information about operating a business to an independent business owner. Concerning the risks mitigation efforts of a franchise, therefore, we find that franchising reduces the risks associated with business considerably. Michael, S. C. (2000). Franchising: Advantages and Disadvantages. While distribution is one of the primary activities of an organisation, expansion is a larger and long term goal. Franchising is a continuing relationship in which the franchisor (the You can get a custom paper by one of our expert writers. Those three main benefits for franchisees make the investment well worth the up-front cost of owning a franchise. Franchises can generally bring in revenue fairly quickly due to low startup costs and immediate corporate branding support. Advantage #4 - Ongoing Advice, Research and Development. Most of the franchisees are new entrants into the corporate world. The franchise format differs with type of industry and type of goods sold. 1. Business assistance One of the benefits of franchising for the franchisee is the business assistance they receive from the franchisor. A futuristic research agenda for the field of franchising. According to the United States Census Bureau (2015), the population is approximately 12,000 people. We are asking for your phone number so the businesses you have requested more information from can call/text you to chat with you more about their opportunity. Some of the advantages with owning a franchise are the comfort of not having to be totally in control of the business. In clearly analyzing franchising as an effective way of getting into business, we realize that in franchising a lot of useful time is saved. We do not share your phone number with anyone other than the specific businesses you are interested in learning more about. We can then conclusively say that ,in the corporate world today, franchising is an effective and innovative form of business yet devised to distribute products and services and as such a major growth area for business. Free Essay Examples - WowEssays.com. "Drawbacks and Benefits of Franchising Essay." IvyPanda. . German breweries in the 1840s also used franchising to distribute their beer to different geographic areas. Starting a franchise comes with the benefit of starting a business with pre-existing brand recognition, processes and plans. Essays on Franchisor 29 samples on this topic The array of written assignments you might be tasked with while studying Franchisor is stunning. As such, a uniform system of operation enables the consumers to acquire products and services of quality efficiently and at an effective cost. Higher decision rights are allocated to the franchisee in highly uncertain environment, in markets with greater difference in socio-cultural conditions and higher geographical distance between the two markets. There are key advantages for choosing a franchise when starting a new business. A franchisor uses this tool as a method of distribution of goods or services, international expansion and meeting other goals. Franchising is aimed at risk minimization. From a franchisees perspective, the trial and error durations that are usually associated with establishing and running a business are completely avoided. ensure the integrity of our platform while keeping your private information safe. Small details such as the color scheme, to the inventory items to be placed on the menu or on the shelves, are all determined by the franchisor. Capital Preservation. This is because such a firm is already established. As seen in this paper its disadvantages compared to its demerits, in comparison with other types of businesses are many. Effective strategies in this line of business can prove to be a benefit for new entrants in the business world and to established businesspersons wishing to venture into new areas or diversify in their current work. Through such a network the franchisee can discuss market trends and emerging management practices that will their business. It benefits both the parties involved in franchising. (the buyer) to do business and offers assistance in organising, [Accessed June 03, 2023]. Hence, a franchisor can easily benefit from the venture. BIBLIOGRAPHY Frazer, L., Merrilees, B., & Wright, O. Internal server error. Depending on the type of franchise you run, your extended franchise network will only benefit the distribution of services of your business. 2022. Besides, a central operation platform enhances improved delivery of high quality products and the quantity of production. First, a franchise owner enjoys the independence of operating under a big and reliable business network (Sherman, 2011). Franchises also have large-volume, centralized buying power. To install StudyMoose App tap Growth and unit expansion. Privacy According Jewell (1999) franchisor can benefit from rapid low cost market expansion. Christensen, R. (2006) Roadmap to Successful Strategic HR Management. A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system. Owning a company millions of people where interested in providing money for. Franchise means privilege or freedom and the word originates from an old French dialect. Managing the expectations of organisations shareholders is a key consideration in any business decision of a corporate. Order a unique paper from WowEssays right now! How Does the Leadership Style Adopted by the Franchisor Affect the Behavior of the Franchisee? A franchise refers a privilege given to an individual or a group of people to be able to market or sell products or services of a certain enterprise within a certain location/locations. The above argument lies on the fact that the franchise agreement has restrictions on how the business will be operated. Conclusion . A disadvantage is being limited to your earnings, meanwhile a business which strictly belongs to one person may see a 300% increase in profits. The franchisor should ensure that the franchisees structure is legally permissible for franchising; the franchisee is financially sound to undertaking the responsibility and the franchisee is capable of running the business smoothly. LaFranchi explains this with an example of Mexico. Then, the advantages of Franchising are explained. According to Mumdiev (2009), allocation of rights is an important determinant in franchising and factors affecting franchisors modal choice. Pease, Tom. Once the industry has been identified, selecting the right company becomes the second challenging task. Mobilising capital is one of the reasons for corporates to get into a franchising model. The franchisor will be able to offer assistance in sourcing the products and services that franchisees will require to operate their business, and in some cases will even act as the franchisees main supplier. It is also important that the location is convenient for the franchisee to travel. Policy. Interested in learning more about franchising and how this business model works for growing companies today? Boston, MA: McGraw-Hill Irwin. When you purchase a franchiseespecially a business unit from a successful, national franchisethe business comes with brand awareness. Sherman, Andrew. "Benefits Of Franchising Essay Examples." The shortcoming that could challenge this form of business could be the fact that the initial cost of purchasing franchise is high. It is a key decision for both, the franchisee and the franchisor. Understanding the pros and cons of franchising can help people determine if franchising is the right choice for an entrepreneurial venture. The primary reason that the failure rate is so high is because the owners have to go through the learning curve of operating that specific type business. Accessed June 03, 2023. IvyPanda, 19 June 2022, ivypanda.com/essays/franchising-essay/. For successful business owners looking to grow or scale their established brand by opening additional new locations, franchising can be a smart move that comes with several advantages. Support should be offered to franchisees alongside the recruitment and training programs when the franchise program is being started. If you use an assignment from StudyCorgi website, it should be referenced accordingly. Availability of cheap labour and rent is also essential in identifying an ideal location for franchising. Since most of these reasons normally do not get met within the initial three years after starting the business, the business owners give up on the ventures consequently leading to their failure. Franchises typically offer advantages such as cost stability, training, and the support of a larger network. The constant monitoring helps the franchisee in getting regular feedback and improvising. Selden, Gipson and Parker (2008) state the importance of franchising for business entities. The major factors that affect franchising decision for a franchisor are industry selection, company selection, location, ownership type, legal considerations and permissions, transportation. Get your custom essay on, Advantages and disadvantages of franchising , Get to Know The Price Estimate For Your Paper, "You must agree to out terms of services and privacy policy". Retrieved from http://www.strasburger.com/calendar/articles/intl/jwl_intl01.pdf In this paper, I have looked at the factors that make franchise be considered as the major growth area in business. You are free to use it for research and reference purposes in order to write your own paper; however, you [Internet]. When you are able to have multiple unique, competing business units in multiple geographic locations, you have varied streams of revenue which allows you to be flexible. This arrangement makes is easier for the franchisee to set up the business and increases the chances of success CITATION Hun11 l 1033 (Hunter, 2011). One of the fastest and most popular ways to increase the size of a business is to turn it into a franchise, which can then be purchased by individuals. Your privacy is extremely important to us. Some small businesses fail because they are started for the wrong reasons. It is from understanding the working of franchise shall we then come to appreciate the advantages and disadvantages of franchising (Noora et al. Internal server error. Consequently, business procedures are uniformed across the board due to the presence of a central system of organizing operations. Well occasionally send you promo and account related email. McDonalds is a classic example of an international franchisee business operating worldwide. Franchises expand number of businessmen, complete of willpower and ideas, into the organization. The business comprises over 300,000 franchisee. Regardless of the payment method you choose for checking out, all transactions are safe and encryption-protected. Moreover, pilot operation equally requires additional overhead costs that must be availed. Franchising is a tool of business expansion for companies having a profitable business model and strong brand equity in the market. Firstly, multilevel marketing or network marketing products usually have a good level of branding in that, consumers are able to recognize the product that is offered to them. Success is not reached by simply creating a business, however. economy. A franchisee gets to market a strong brand with high customer awareness. 2005). (2012). It takes into consideration the regulations of different countries before making a location choice. Hence, franchising is a very effective tool for overseas expansion without huge capital investments. This essay "Drawbacks and Benefits of Franchising Essay" was written and submitted by your fellow Mumdiev, Nada (2009). The franchisor trains the franchisee and dictates the system of operationalization of the business concept. The ideas behind being in a franchise rather than trying other forms of entry into business such as buy out or starting an entirely new business lies on the fact that in franchise there is always already proven business formula and structure that is in place. 840 Franchising has exhibited dramatic growth since it offers some significant advantages when compared to other distribution methods. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. This is an evident advantage of franchising. While the royalty earned will motivate the franchisor to maintain quality standards in a franchise, the human and capital investments will motivate the franchisee to efficiently operate the business. This in turn brings the benefit of growing the purchasing ability and the customer brand loyalty. It is in the interest of the franchisee to own the company and pay fees to the franchisor for marketing rights. According to Selden, Gipson and Parker (2008), these four franchise formats are business format franchises for products, business format franchises for services, product franchises and affiliation franchises. Please try again later. But the benefit of the franchise model is youre developing your workforce in a way that will increase retention and customer service and quality. StudyCorgi, 23 Jan. 2022, studycorgi.com/franchising-advantages-and-disadvantages/. sample is kindly provided by a student like you, use it only as a guidance. Then, the advantages of Franchising are explained. December 2019. A location that is hub of economic activities, has unmet demand for the franchisors products or services, has good infrastructure facilities and is politically stable is the ideal location. Lack of management skills is another reason why some small businesses fail. Business format franchise, for products, is a franchise format in which the franchisor first develops a successful business concept for a prescribed product and a strong brand. McDonald's be aware of the advantages of a franchise company. Since market trends are incorporated in formulating a code of ethics, this document helps the business integrate these trends and other beneficial market practices in its managerial, human resource, marketing, and operation functions. A code of ethics ensures that a business makes market and legally acceptable decisions in all levels of its operations. Retrieved from http://studymoose.com/advantages-and-disadvantages-of-franchising-essay. As such, buying franchise from firms like park mail will help save on such risks. If you expand your brand through franchising, the investment in new . Retrieved from https://ivypanda.com/essays/franchising-essay/. Drawbacks for Franchisor 8. This corporate support varies from franchise to franchise, but some franchises excel at thiseven offering training programs and even certifications for franchise employees. What are the best franchising advantages? Six Sigma for Small Business. Review our cookies information for more details. According to Swart, franchisees usually have greater access to capital as compared to individual business persons (74). In the introduction of this paper, we began by conclusively saying that franchising is a major growth area for business and as such, the most efficient and innovative form of business yet devised to distribute products and services. "Franchising: Advantages and Disadvantages." Business are able to expand by franchising in order to gain access to external capital that can fund growth of new outlets or stores that are run by committed and profit driven franchisees CITATION Fra12 l 1033 (Frazer, Merrilees, & Wright, 2012). Retrieved from http://www.franchise.org/uploadedFiles/Franchise_Industry/Resources/Education_Foundation/Intro%20to%20Franchising%20Student%20Guide.pdf However, it is not easy for a company to make a franchising decision given its complexity and direct impact on the business. Product franchise is an arrangement wherein the franchisor manufactures and distributes the products through franchisees. Accessed 03 June 2023. Journal of Marketing Management, 11-29. Business expansion is another important reason for using the franchising tool. . But why does this model work for franchisors? Here, well take a look at the main franchise advantages for all parties. The most common erroneous purpose for starting a small business is to generate a lot of money. For people who want to apply franchising in the Chinese market, they may wish weight all options. He can choose to buy a franchise from the dominos pizza. The factors affecting franchising decision differ for a franchisor and a franchisee. The most famous are the McDonalds, dominos pizza, subway etc. Available from: https://www.wowessays.com/free-samples/what-is-franchising-essay/, "What Is Franchising Essay." Krocs initial fee to opening up a mcdonald's was a 950 dollar fee, he was more interested in saleing his product. We only work with verified PCI DSS-compliant platforms that ensure customers' confidentiality and absolute security of their data. Type of paper: Now you can download documents directly to your device! A person wanting to get into hotel and hospitality industry may take years before establishing his industry. Lastly, the franchise will provide consistent and extensive training in every aspect of the business (Goldberg, 2015). The first part highlights the importance of franchising for the franchisor and franchisee. "Benefits Of Franchising Essay Examples. If your product and service is good, youll be able to carry the weight temporarily for low-performing business units. 1) The power of the existing brand If the franchise is already a household name then this is one of the best benefits of franchising. You will receive your password on your email. Risk Management and Other Factors in Business, Business, Government, and Society: A Managerial Perspective, * Hyperlink the URL after pasting it to your document. Expanding the scale of operation requires huge capital expenditure. Buy now, save instantly, get the job done on time! There are also other hidden vagaries in the marketplace that may impede the profitability of franchising. Introduction Franchising is a fast growing business model in the United States. If you are the original creator of this paper and no longer wish to have it published on StudyCorgi, request the removal. Franchise can last from five to thirty years. Business growth is the driving force of the economy. In some cases, the franchisor also provides financial support to the entrepreneurs, depending on the latters capabilities. We only work with verified PCI DSS-compliant platforms that ensure customers' confidentiality and absolute security of their data. Dant, R. P. (2008). They will train both in the practical aspects of the business as well as some management training. One of the earliest examples of franchising occurred in New South Wales, with franchising agreements between hotels and breweries. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. The new store or outlet has to conform to the image that the franchisor has already set up. In the todays corporate world, people want a guarantee on the product and services they are purchasing. This is why it is important that before starting a business, a person should invest in short-term managerial course to equip them with the required skills of learning their own business unit. This may then make the franchisee look a slave to the franchisor, as he cannot seek for other suppliers offering better deals. One of the merits of franchising is that most franchisees record impressive profits especially when managed effectively. Brue, Greg. Print. Therefore, Franchising allows individuals to become their own boss. Retrieved from https://studycorgi.com/franchising-advantages-and-disadvantages/, StudyCorgi. This is because the franchisor in most of the time provides wide-range preparation and support to the franchisee. As such, recognition across the board (name, brand etc.) Franchises do have to adhere to certain franchisor requirementsincluding using the franchise name and branding, specific products or services, and adhere to corporate policies. This includes all the logistics involving the successful running of the business like advertising, legal processes, training etc (Carnal, 2007). And while its true that the best franchisees are the ones who know how to follow a plan, the benefits of owning a franchise might actually allow for more independence than you might think. In return, the business owner (franchisee) pays a fee and royalties to the, In this approach, a company provides a business owner with a proven method for operating a business using the name and trademark of the company. The franchisee pays a certain sum of money for the right to market this product (Rubin, 1978, p.224). This kind of support is expensive and rare for entrepreneurs forming their own small business. This too serves to make the argument that franchising is a major growth area for business. Franchisor have advantage from buying power and efficiency due to large scale of franchise so they can negotiate lower prices for the products and services needed to run business. Type of paper: We will write a custom Essay on Drawbacks and Benefits of Franchising Essay specifically for you for only 9.35/page. & Hitt, R. D. (2010) Strategic Management: Competitive and Globalization, Concepts. In the third part,. As opposed to businesses such as start ups, buying a franchise proves to be helpful to the franchisee as he can enjoy the protected reputation of the franchisor. Isaac Singer was known to pioneer the use of written franchise agreements. Prices dropped - now starting at just $8 per page! Entrepreneurs are generally known for their ingenuity, creativity, and their ability to assess and take risks in the pursuit of good business opportunities. In the case of a company, depending on whether it is Limited Liability Company or liability company, the entry requirement is a tiring task. One does not have to develop an advertising strategy or solid branding as this is done by the franchisor. https://studycorgi.com/franchising-advantages-and-disadvantages/. https://www.wowessays.com/free-samples/what-is-franchising-essay/. Type your requirements and Ill connect you to The reason many entrepreneurs end up exploring the potential of owning a franchise comes down to the start-up costs of a new business. (Christensen, 2006). These entry areas vary depending on the type of the business. Some advantages are bargaining power with suppliers and a high success rate. Franchising is one the best solution for transitioning from employment to a business owner. There are benefits to franchising if you follow the franchising laws, but if you don't do it correctly, you incur regulatory and legal risk. student. 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