IvyPanda, 19 June 2022, ivypanda.com/essays/franchising-essay/. Once the industry has been identified, selecting the right company becomes the second challenging task. It may not be appropriate to underestimate the challenges associated with initiating and running small business entities. One of the merits of franchising is that most franchisees record impressive profits especially when managed effectively. 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. The franchise can only be secure when the most suitable candidates are selected. A franchise is also advantageous since the franchisee gets to use the management team of the franchiser which increases the possibility of success. Buying a franchise has both advantages and disadvantages. Zutshi, S. (2010) Property Magic 2010: How to Buy Property Using Other Peoples Time, Money and Experience. 1. Since the small business units serve small market segments, they are able to specialize in serving these markets and hence in ensuring the business units are effective in their operations. Franchising is a very effective model of business for an entrepreneur. A country with very high illiteracy and poverty rates, lack of proper infrastructure and political unrest can never be a good investment location. Because the franchisee gets into an already existing company, he is in a position to concentrate in the successful running of the business. You are free to use it for research and reference purposes in order to write your own paper; however, you Moreover, pilot operation equally requires additional overhead costs that must be availed. The purpose of the paper is to highlight the importance of franchising and understand the factors that affect franchising decision of businesses. Franchisee is the one who consumes trademark of the supplier and deliver the supplier's goods. For entrepreneurs who research and analyze how franchises work under their franchisors, they can determine potential investment opportunities that still allow owner-independence. The franchisee is in a position to check and prove the success of The Company before committing resources. 19 June. Franchising is defined as "a commercial agreement between a party that owns a trade name or trademark (the franchisor) and party that sells or distributes goods or services using that trade name or trademark (the franchisee) (Kubasek et al., 2015, p. 431). International Franchising: Legal Structures and Issues. In addition, reduced cost of advertising and operation expenses is enjoyed by a franchisor. Trademark, Format, Organisation, Catalyst, Trade Name. BIBLIOGRAPHY Frazer, L., Merrilees, B., & Wright, O. Franchise.com has created a franchise database that provides start-up costs for owning a new franchise, relevant details about what is required from franchisees, and other important information for anyone considering an opportunity with franchising. Available from: https://www.wowessays.com/free-samples/what-is-franchising-essay/, "What Is Franchising Essay." This legal and procedural protection includes legal departments set aside to handle legal issues such as lawsuits. 1. The database is updated daily, so anyone can easily find a relevant essay example. professional specifically for you? Franchises can generally bring in revenue fairly quickly due to low startup costs and immediate corporate branding support. On the other hand, a franchisee wishing to sell his franchise can only do so with the approval of the franchisor. "Benefits Of Franchising Essay Examples. Little to no industry experience is necessary. The franchisee pays a certain sum of money for the right to market this product (Rubin, 1978, p.224). to another business, the franchisee. This is however not the case because a part from being a success in the fast food business, franchising has also been a success in other fields such as the finance automotive, cleaning and maintenance health etc. Franchises typically offer advantages such as cost stability, training, and the support of a larger network. Interested in learning more about franchising and how this business model works for growing companies today? With franchisees taking ownership of the majority of the risk with their individual franchiseand with multiple franchises spread across an areathe risk is mitigated for the franchisor. Also, some entrepreneurs fail because of over-investing in fixed assets while starting the business instead of concentrating on building their brand first. 2019. Mobilising capital is one of the reasons for corporates to get into a franchising model. International franchising also places company's name and presence in a global market. Most of the businesses that fail do so because the owners have to undergo the business specific learning curve. The weighing of both the merits and the demerits of the franchise has left us with the weigh inclined to the merits. Pease, Tom. The above arguments have been made after a careful weighing of the shortcoming of franchising. This benefit in addition to the already established body of legal protection is an important factor in the success of the new franchise (Bowles, 2011). 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. But why does this model work for franchisors? If you use an assignment from StudyCorgi website, it should be referenced accordingly. Growth and unit expansion. * Franchise: In a franchise operation, the Franchiser licenses the rights to its name, operating procedure, etc. In other words, the entrepreneur is the independent, modern-day homesteader, looking to create their own opportunities. Disadvantages: Franchising is a regulated industry, and you must ensure that you follow all franchise laws before providing or selling franchises. 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. Retrieved from http://emnet.univie.ac.at/uploads/media/Zizic_01.pdf Password recovery email has been sent to email@email.com. an academic expert within 3 minutes. Transportation costs are very high for imported goods. If some are too bewildering, an expertly crafted sample Franchisor piece on a related topic might lead you out of a dead end. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. [Internet]. It is also prudent to mention that both the capital and earnings can be boosted at the same time due to the available opportunities. There are also other hidden vagaries in the marketplace that may impede the profitability of franchising. The startup cost can have a wide range depending on the franchise, therefore most franchise have financial loan program (Geoff, 2013). Capital is the primary reason most companies turn to franchising, and the most common barrier to expansion by small businesses. Customers are already familiar with your service or product. Your privacy is extremely important to us. StudyCorgi. Advantages of franchising One of the merits of franchising is that most franchisees record impressive profits especially when managed effectively. The following section discusses the decision points for both the parties. As discussed so far, franchising is an important part of business expansion strategy, especially for overseas expansion. Wow, glad you're interested in so many businesses! (2012). January 23, 2022. https://studycorgi.com/franchising-advantages-and-disadvantages/. 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). From a franchisees perspective, the trial and error durations that are usually associated with establishing and running a business are completely avoided. Hunter, R. (2011). 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. LaFranchi explains this with an example of Mexico. 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. The franchisor looks at its decision of franchising with a more global angle through analysis of the global market and legal scenario, a franchisee has a local approach to make an investment decision. It has come to help the individual entrepreneurs to be in business for themselves but actually not for themselves. The franchising is more prevalent in the restaurant industry (Hoffman & Preble, 2003). In clear terms, a franchisee is the individual who embarks on purchasing and consequently running a franchise. No spam, just good, helpful information for aspiring entrepreneurs. Krocs took a different approach when he started franchising his business he stopped pursing wealthy men who seen his company as an investment and pursued families whos lifes he could change and promising a better future. 2022. Having the protection of the franchisor is an important factor that can keep the franchisee surviving in the corporate world as with it come the positive expectations that keep the customers loyal to the products or the services offered by the franchisee. New York: American Management Association. The companies can also take advantage of the local goodwill of the franchisee. A manufacturer of a technologically advanced product requires having a great presence in the retailing of its product. Brue, Greg. Dont waste Your Time Searching For a Sample, Speech about entrepreneurship and franchising, Challenges of Franchising and Licencing in International Business, Fast Food Franchising of Boston Chicken Restaurants, The advantages and disadvantages of probation and parole. Following section discusses the importance of franchising in detail. 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. Read more advantages of franchising. This is the challenge for franchisees: to piggyback off any positive associations with the franchise brand while distancing your specific unit from any negative brand associations that might exist. ", "Benefits Of Franchising Essay Examples,". Franchising: Advantages and Disadvantages. Starting a franchise comes with the benefit of starting a business with pre-existing brand recognition, processes and plans. The company will usually provide a significant amount of assistance to the business owners in starting and managing the company. Franchising is aimed at risk minimization. StudyCorgi. and submitted before, Note! A major advantage of franchising is the marketing the franchisee's business gets from advertising campaigns by the franchiser. | | d. | Weekly or monthly royalty fees are usually around 2% of net income. Franchising is a tool of business expansion for companies having a profitable business model and strong brand equity in the market. Offers the franchisor a method of rapid expansion. In other words, quality can be effectively controlled by the franchisor. While an entrepreneur gets independence in this model, he or she is not adversely affected by the nuances of a start-up entity. Sometimes there is a trade-off between buying cheaper products and reducing transportation cost. Small businesses may also fail due to lack of sufficient capital. A small central organization can be developed by the franchisor. Because of the group purchasing ability provided by a number franchises, franchisees are able to procure commodities and stores supply at a comparatively lesser cost from the franchisor. Hence, it is better for a franchisor to have the franchisee own the franchise. The high rate of competition in the sporting field also demands excellent franchising opportunities (Hisrich, Peters & Shepherd, 2013). For example, continuous moral and financial support is required by such businesses so that they can perform well. 1. Research shows that only 10% of new businesses are still operational three years after they are started (Pease 9). June 19, 2022. https://ivypanda.com/essays/franchising-essay/. The franchisor will also need to take care of any legal permission required in appointing a franchisee. Chicago: Morgan James Publishing, 2009. | Some franchisors require a new franchisee to pay a "grand opening" fee. 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. Disclaimer: Services provided by StudyCorgi are to be used for research purposes only. "Drawbacks and Benefits of Franchising Essay." Factors affecting franchising decision differ for a franchisor and a franchisee. It has come to help the individual entrepreneurs to be in business for themselves but actually not for themselves. 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. It therefore turns out that franchising is a major growth area for business. the company from whom the franchisee is buying the franchise (Scarborough, 2010). 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. The franchisor needs to consider the socio-economic and political situation of the country as well. Franchising is defined as a commercial agreement between a party that owns a trade name or trademark (the franchisor) and party that sells or distributes goods or services using that trade name or trademark (the franchisee) (Kubasek et al., 2015, p. 431). "Drawbacks and Benefits of Franchising Essay." This format is very similar to business format franchise for products. There are a lot of benefits prospective franchisees can get from Subway, the company provides their franchisees with assistances before and after they open a Subway restaurant. In franchising, another important factor worth noting, which could be detrimental to the running of the franchise, is the fact that all profits, which include a certain percentage of all the sales made, are shared with the franchisor. I'm fine with missing my deadline, WowEssays. Now you can download documents directly to your device! (2011) Strategic Management: Competitiveness and Globalization. The business owner pays a fee or royalty in return. Buy now, save instantly, get the job done on time! The new store or outlet has to conform to the image that the franchisor has already set up. First, while a franchisee may be opening a new store, it is part of an already established business and system. It is not simply an ability to grow which creates a successful Franchise and nor is it the desire of any franchisor to adopt every potential franchisee. Lets recover your password in no time! Policy. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. Get help with 11% offusing code - GETWOWED, No, thanks! supplier who allows an operator is introduced as franchisor. This may then make the franchisee look a slave to the franchisor, as he cannot seek for other suppliers offering better deals. If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. Franchising is one the best solution for transitioning from employment to a business owner. 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 franchisor looks at its decision of franchising with a more global angle. 1. Fifthly, franchisee does not encounter barriers to entry into new markets or industries. Lastly, franchising requires a lot of permissions and approvals from the franchisor and other concerned regulatory bodies. January 23, 2022. https://studycorgi.com/franchising-advantages-and-disadvantages/. The paper is divided into four parts. It is a key decision for both, the franchisee and the franchisor. Success is not reached by simply creating a business, however. In such a case, franchising becomes a useful tool in gaining some knowledge about the business. Goof-ups have dragged many companies down whereas a good promotional policy has proved a saving grace for others. Scarborough, N. M. (2010) Effective Small Business Management an Entrepreneurial Approach. For profitable selling, the product should be either unique, cost competitive and acceptable in the new market. A person can also enter into mergers or form a limited liability company among others. 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. Franchising is an important strategic business tool for international expansion. This is exactly what the company might be looking for. Covering the costs on your ownand with an acknowledged delay before developing consistent revenuenew businesses often fail before they can support themselves. owner of a company) provides a licensed privilege to the franchisee Costs In exchange for the right to use the franchisors name and assistance, you will pay some or all of the following fees. This article highlights the top benefits. Benefits Of Franchising Essay Examples. Lansing, Kansas. They will train both in the practical aspects of the business as well as some management training. This too is a demerit of franchising because, though the franchisee claims to own the business, he can do very little without the approval of the franchisor. Expenditure is even higher for expanding to unchartered territories. Franchisees need help throughout the term of their business endeavors and the franchisor's staff can give this needed help in all aspects of the business. When you are associated with other franchises, their reputation is carried over to your business unit. 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. Fourthly, the franchise model provides a built-in support model, both from the franchisor and from other franchisees throughout the region and nation. Retrieved June 03, 2023, from https://www.wowessays.com/free-samples/what-is-franchising-essay/. This consequently leads to the failure of the entrepreneurs small business due to lack of vital information about the market and emerging trends. Some of the advantages with owning a franchise are the comfort of not having to be totally in control of the business. In the corporate world today, getting into an entirely new business is very difficult due to the many entry inhibitors facing the corporate world. There is a general understanding within any franchised, Now franchising study is one of the top issues of the Kazakhstan economy. 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. First, a franchise owner enjoys the independence of operating under a big and reliable business network (Sherman, 2011). Proceed if you agree to this policy or learn more about it. Retrieved from http://www.positivelyminnesota.com/Data_Publications/Publications/All_Other_DEED_Publications/Small_Business_Assistance_Office_Publications/An_Introduction_to_Franchising.pdf. And theyll generate independent demand. Advantages of Franchising 1. An email with your password has already been sent to you! Hence, a franchisor can easily benefit from the venture. When starting a business, a significant portion of funds is allocated to business research. Most franchisors give the franchisee detailed training in order to ensure that they develop the required level of expertise to achieve profitability. Franchise arrangements can be subdivided into two categories: Business format and product/ trade name franchising. The most famous are the McDonalds, dominos pizza, subway etc. "Benefits Of Franchising Essay Examples." Give us your email address and well send this sample there. Managing the expectations of organisations shareholders is a key consideration in any business decision of a corporate. WowEssays, 15 Dec. 2019, https://www.wowessays.com/free-samples/what-is-franchising-essay/. Despite the fact that big businesses demand a hefty sum of money as a franchise fee, the benefits of franchising are still very attractive to many. 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. While it's essential to have business acumen, no specific industry experience is required to purchase a franchise. He can choose to buy a franchise from the dominos pizza. Lastly, the franchise will provide consistent and extensive training in every aspect of the business (Goldberg, 2015). Now you can download documents directly to your device. 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. What Is Franchising Essay. Also, the franchiser is readily available to help the franchisee formulate effective marketing campaigns; this gives the franchisee an advantage over other starting businesses (Sherman 167). There are key advantages for choosing a franchise when starting a new business. By Industry Automotive Franchises Beauty Franchises Beverages Franchises Business Opportunities Business Services Children Related Cleaning Franchises Computer & Internet Earth Friendly Education Franchises Financial Services WowEssays, 07 Dec. 2019, https://www.wowessays.com/free-samples/benefits-of-franchising-essay-examples/. If the fee is too high, the franchise business may become unviable for the franchisee. Web. Franchise can last from five to thirty years. If you are the original creator of this paper and no longer wish to have it published on StudyCorgi, request the removal. Franchises expand number of businessmen, complete of willpower and ideas, into the organization. New York: Free Press. It is quite popular in the marketplace. 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. Name recognition in the corporate world is very important because it creates the confidence in the customers such that they always know that they will always be assured of the product or services they are looking for. In order for the franchisee to be fully been incorporated in the franchising company, payment of a certain fee called franchising royalty is necessary. WowEssays. Krocs initial fee to opening up a mcdonald's was a 950 dollar fee, he was more interested in saleing his product. Order a unique paper from WowEssays right now! As such, many people wishing to get into business seek one of the many avenues that are open to them. Bowles, M. (2011) External Environment. Network marking will, therefore, allow one to have free reign to market their business in whichever way they like CITATION Fra12 l 1033 (Frazer, Merrilees, & Wright, 2012). This however could at times be listed in the franchise disclosure document (FDD).but like said earlier it is not necessary. This allows one to leverage on the advantages of being a franchisee whilst overcoming some of the disadvantages associated with it CITATION Hun11 l 1033 (Hunter, 2011). "Drawbacks and Benefits of Franchising Essay." Accessed June 03, 2023. While distribution is one of the primary activities of an organisation, expansion is a larger and long term goal. A person wanting to get into hotel and hospitality industry may take years before establishing his industry. This closeness to the market also helps the small businesses to develop a personal relationship with the market. By clicking Register, you agree to our Terms of Service Morgan 2 . As such, recognition across the board (name, brand etc.) (2022) 'Drawbacks and Benefits of Franchising Essay'. This report is an attempt to compare the advantages and disadvantages of franchising which is one of the most known business model. An improved cash flow is provided through capital injection. [Accessed June 03, 2023]. Your responsibility is to develop the existing brand with local customers to build your business in particular. Risk Management and Other Factors in Business, Business, Government, and Society: A Managerial Perspective, * Hyperlink the URL after pasting it to your document. Other reasons include the desire by some employees to start their own ventures so as not to be answerable to anyone. The company that owns the business can expand. When starting a business or venturing into entrepreneurship, it is imperative for one to consider all options. (2005) The International Business Environments of Franchising in Russia. However, it is not easy for a company to make a franchising decision given its complexity and direct impact on the business. Is Buying an Existing Business Right for You? 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. McDonald's be aware of the advantages of a franchise company. ID Owning a company millions of people where interested in providing money for. When some business units or areas arent performing, you can generally make up for that in other areas. It is most common in retailing and service industry. There are several businessmen and businesswomen who have thrived and successfully transformed their financial lives through franchising. 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. These in most of the time are the established rules of e.g. 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. The fourth part concludes the paper. 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. A code of ethics is also important in defining the level of interaction between the business and its external stakeholders. A disadvantage is being limited to your earnings, meanwhile a business which strictly belongs to one person may see a 300% increase in profits. Depending on the type of franchise you run, your extended franchise network will only benefit the distribution of services of your business. Therefore, Franchising allows individuals to become their own boss. So what is franchising? StudyCorgi. Accessed June 03, 2023. https://www.wowessays.com/free-samples/benefits-of-franchising-essay-examples/, WowEssays. In this paper, I have looked at the factors that make franchise be considered as the major growth area in business. Retrieved from http://www.strasburger.com/calendar/articles/intl/jwl_intl01.pdf This is further proven by the fact that in franchise, the products and services that one wants to deal with are already in the market and are already established. This too including other support services is provided to the new entrants into the business world. Availability of cheap labour and rent is also essential in identifying an ideal location for franchising. Franchising facilitates McDonald's to have the benefit of greatly quicker expansion and the formation of a actually international "brand identity". In a franchise, legal binding agreement is entered into between two firms, the franchisor (the product or service owner) and the franchisee (the firm to market the product or service in a particular location). There is a conclusive argument that this is one of the most effective ways of getting into business. By franchising the retailing part of the business and vertical integration, companies can improve their overall effectiveness. In such a case therefore, the franchisee is in no position of playing effectively in the dynamic local market. 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. (2013). WowEssays, Dec 07, 2019. It reduces business risk by using proven products or services. The word "franchising" comes from the old French term defining the right for freedom of conducting any activity, for example, carrying out fairs, the organization of markets, operation of ferries and crossings, the right for hunting, a construction, Advantages & Disadvantages of Franchising Typically, a company also requires the owner to purchase supplies from the company. Consequently, business procedures are uniformed across the board due to the presence of a central system of organizing operations. This is an evident advantage of franchising. This is because the business model and the franchise company already is in place and thus the time the individual in establishing the model of a new business is saved could use that. Well email you the instructions on how to reset it. Committing resources to this kind of business without enough capital or information is a risky phenomenon. Business growth is the driving force of the economy. Entrepreneurs are generally known for their ingenuity, creativity, and their ability to assess and take risks in the pursuit of good business opportunities. The only difference is that the franchisor trains and dictates the franchisee on a prescribed marketable service, rather than product. Building a brand and customer awareness in a costly and long term activity. Franchise means privilege or freedom and the word originates from an old French dialect. A franchisor is the party that owns the business model and the trademark. Also, they are locally present and have a deeper understanding of the socio-economic patterns of the region. Companies see franchisees as a source of capital. Drawbacks and Benefits of Franchising Essay. Accessed 03 June 2023. So what is franchising? To install StudyMoose App tap These entry areas vary depending on the type of the business. 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. Franchisees gain numerous advantage when they purchase a franchise. Through such a network the franchisee can discuss market trends and emerging management practices that will their business. 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". Prices dropped - now starting at just $8 per page! Mumdiev, Nada (2009). New York: Entrepreneur Press, 2005. We will write a custom Essay on Drawbacks and Benefits of Franchising Essay specifically for you for only 9.35/page. 17055, Well-researched, fact-checked, and accurate, Eloquently written and immaculately formatted. By continuing to browse the site you are agreeing to our use of cookies. Now you can download documents directly to your device. It is, thus, recommended that a franchisee hires a well-informed lawyer to take care of these issues. Drawbacks of Being a Franchisee 10. But the benefit of the franchise model is youre developing your workforce in a way that will increase retention and customer service and quality. In case of a partnership, such requirements as articles of association or memorandum of association may be one of the requirements that the state demands to authenticate any entry into partnership (Michael and Hitt, 2010). Also, there are different contractual structures available for franchising. This includes all the logistics involving the successful running of the business like advertising, legal processes, training etc (Carnal, 2007). The major factors that affect franchising decision for a franchisor are industry selection, company selection, location, ownership type, legal considerations and permissions, transportation. This means that the businesses lack adequate operating capital when they start up which leads to their failure. Six Sigma for Small Business. It serves as a mode of distribution for an organisations products or services. Some small businesses fail because they are started for the wrong reasons. Ben Ottewell of Gomez - David McMillin of Fort Frances Essays Examples, Music Distribution: More Service Oriented: A Top-Quality Essay For Your Inspiration, Privacy Franchising is the practice of the right to use a firm's business model and brand for a prescribed period of time. ensure the integrity of our platform while keeping your private information safe. 1. 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. Spreads the brand messaging and awareness over a large network of franchise owners. "What Is Franchising Essay." Capital Preservation. Noora, et al. Selden, Andrew C., Gipson and Parker (2008). Review our cookies information for more details. Please try again later. These include difficulties in raising the necessary fees like business permits and the all-important capital. Accessed June 03, 2023. There are key advantages for choosing a franchise when starting a new business. He states that before formulation of the Industrial Property Law in 1991, Mexico was a difficult market to get into because of its many restrictions and limitations. . Benefits: International franchising means new markets with new customers and selling potentials. Accessed 03 June 2023. June 19, 2022. https://ivypanda.com/essays/franchising-essay/. Sherman, Andrew. Here, well take a look at the main franchise advantages for all parties. Most business experts agree that a franchise operation has a lower risk of failure than an independent business. 2011). "Franchising: Advantages and Disadvantages." WowEssays. Because of the success of the franchising form of business in the food industry, many people have come to associate franchising with only fast food like the MacDonald and the dominos pizza. Strategic Management Journal, 21(4), 497. These are brand recognition, low risk to failure, easy set up, ready customer portfolio and easy to find financial . The advantages for the franchisor. ID | | e. | Franchisees may have to pay a monthly royalty even if the business is losing money. 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. Free Essay Examples - WowEssays.com. Millmore, M. (2007) Strategic Human Resource Management: Contemporary Issues. HISTORY. He gets regular training, national marketing support and constant monitoring of quality standards. 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. Enter your email and well send the instructions. According Jewell (1999) franchisor can benefit from rapid low cost market expansion. Power and control in the franchise network: An investigation of ex-franchisees and brand piracy. Branding is a huge responsibility that has the ability to make or break a company. It is like owning the business, but running it under the guidance of an expert. "Drawbacks and Benefits of Franchising Essay." Franchising provides opportunities that are beneficial to both the parent company and the purchaser. Michael Einbinder, founding Partner of Einbinder & Dunn, states: "Franchising restaurant concepts allows for fast growth. 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. One does not have to develop an advertising strategy or solid branding as this is done by the franchisor. This model is advantageous since it helps reduce the risk involved in starting a new business. Most entrepreneurs that fail do so because they overlook integral aspects of starting up a business for example market research (Pease 116). 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. Print. Order a unique paper from WowEssays right now! In clearly analyzing franchising as an effective way of getting into business, we realize that in franchising a lot of useful time is saved. Franchising is at least 150 years old. 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. This allows the franchisee to have a piece of minds knowing that the company is steering the business in the right direction. Accessed June 03, 2023. https://www.wowessays.com/free-samples/what-is-franchising-essay/, WowEssays. The franchise infrastructure demands considerable capital allocation so that it can be successful especially on the part of the franchisor. Now you can download documents directly to your device! This benefits both the franchisee and the franchisor. The most common erroneous purpose for starting a small business is to generate a lot of money. "Franchising: Advantages and Disadvantages." Retrieved June 03, 2023, from https://www.wowessays.com/free-samples/benefits-of-franchising-essay-examples/. While a franchisor uses this tool as a method of distribution and international expansion, a franchisee uses it to reduce business risk. According to Swart, franchisees usually have greater access to capital as compared to individual business persons (74). 1. Business assistance One of the benefits of franchising for the franchisee is the business assistance they receive from the franchisor. Amazing writer! Eventually, franchisees may access confidential information if the franchisor is compelled to release them. The second part mentions the types of franchising formats. IvyPanda. Eight disadvantages of franchising Costs may be higher than you expect. Dant, R. P. (2008). The Benefits of Franchising One of the main benefits of franchising is lower risk. Enter your email and well send the instructions. Franchisor must provide training; help with management equipment and materials 2. This essay "Drawbacks and Benefits of Franchising Essay" was written and submitted by your fellow This corporate support varies from franchise to franchise, but some franchises excel at thiseven offering training programs and even certifications for franchise employees. economy. In franchising, the entry and exit becomes another advantage that makes this form of business be considered as a major growth area in business. Before a start up establishes enough to command recognition by the customers, it may take many years of continued effort in advertising. To start with, the swot analysis is defined. 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. Type of paper: Beer, M. (1999) Readings in Human Resource Management. London: Wiley. By continuing, you agree to our Terms and Conditions. Advantages and disadvantages of franchising. Franchises have lower rates of failure. sample is kindly provided by a student like you, use it only as a guidance. Besides, a central operation platform enhances improved delivery of high quality products and the quantity of production. The extent of involvement of the franchisor in the distribution of its goods depends on the type of franchise format used. However, buying a franchise of established hotels like Day Inn and Supper 8 will prove beneficial in establishing his hotel. StudyCorgi, 23 Jan. 2022, studycorgi.com/franchising-advantages-and-disadvantages/. Lets recover your password in no time! Furthermore, a confirmed or established business format is prudent for sports-related ventures owing to limited time to form such businesses. Published Dec 15, 2019. 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. An Introduction to Franchising. (2022) 'Franchising: Advantages and Disadvantages'. London: Wiley. (the buyer) to do business and offers assistance in organising, Transportation costs can have huge impact on the viability of a business. Franchising is a continuing relationship in which the franchisor (the In franchising, there are some important concepts that one has to understand. An additional source of income is created through franchising. Investments to create bargaining power: The case of franchising. | | c. | Franchisees are often required to pay into a national or regional advertising fund. This is IvyPanda's free database of academic paper samples. How Does the Leadership Style Adopted by the Franchisor Affect the Behavior of the Franchisee? The model is gaining popularity with increasing focus on liberalisation and removal of entry barriers. It may be a daunting task to read and comprehend these documents. | FranchiseDirect.com Buying a franchise is an option that many people looking to run their own small business, as there are a number of advantages to joining this industry. Type your requirements and Ill connect you to We do not share your phone number with anyone other than the specific businesses you are interested in learning more about. 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. Expanding the scale of operation requires huge capital expenditure. The downside? IvyPanda. In addition to this, there are no laws that demand the profitability of the franchisor be displayed. Policy. This is a great tool to learn more about franchising and compare from business to business. You can get a custom paper by one of our expert writers. Franchising Subway Essay. 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. It also brings brand identification among the potential markets. Business expansion is another important reason for using the franchising tool. In this way, the franchisee gets to own the business with higher chances of success because the business strategy is already tried and tested elsewhere. [Internet]. It is also important that the location is convenient for the franchisee to travel. First, while a franchisee may be opening a new store, it is part of an already established business and system. Franchise is when a large business hires its name to other businesses to produce and sell its goods or services. Distribution is one of the basic reasons for having franchisees. One of the most suitable ways of achieving such an objective is to buy into a franchise. Typically, there are four franchising formats usually followed by organisations as a method of distribution of goods and services. Franchising helps reduce these funds by providing the researched and tested data and business philosophies. consideration. (2022, January 23). These are the franchisee and the franchisor. You will receive your password on your email. Get custom essay This research critically examines how franchising play vital role in retail business growth and expansion in the food industry, using the Strand Mc Donald's as a case study. We use cookies to enhance our website for you. 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. Getting into start up for example may prove very challenging. Benefits Of Franchising Essay Examples. Mumdiev (2009) states that according to the US Department of Commerce business format franchising accounts for more than 40% of United States retailing industry. (Christensen, 2006). 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. You have reached the maximum of . Retrieved from http://www.franchise.org/uploadedFiles/Franchise_Industry/Resources/Education_Foundation/Intro%20to%20Franchising%20Student%20Guide.pdf The franchisor offers national and international advertising. 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