Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. Advantages and disadvantages of franchising free essay example. The many advantages and disadvantages of owning a franchise should be carefully evaluated before deciding to purchase one. Simply put, franchising involves the owner of the business which is being franchised the franchisor granting to the person who wants to offer the products and services of the franchisor the franchisee rights to use its trademarks, business names, associated intellectual property, knowhow, business systems, training systems and operating manuals in exchange. Advantages and disadvantages of franchising 2315 words 10 pages mk325 tuesday, 23 november 2010 write an individual essay, developing the arguments both for and against franchising as a mode of foreign market entry, outlining also any elements of risk arising for franchisor and franchisee and how they may be minimized. A franchisee cannot simply be fired, however, it is the franchisors responsibility to monitor the franchisees activities closely, identify areas of poor performance and insist that they are rectified. In a franchise business, the franchisor provides a developed way of doing business, ongoing guidance, systems and assistance in return for periodic payment of fees and or purchases. Pdf determining pros and cons of franchising by using. Business growth advantages and disadvantages to franchising your business each franchise agreement requires franchisees to use the name, branding, recipes and practices of the franchisor. The rules of the business are already established and part of the franchise agreement. A franchise is a business entity in which the owner of the enterprise, known as the franchisor, sells the right to operate individual units to entrepreneurs called franchisees. Advantages and disadvantages of being a franchisee.
Before getting involved in franchising in ny or nj, it is important to understand some of the advantages and disadvantages to being a franchisor and franchisee. A good match between franchisor and franchisee, sharing mutual goals over the long term, is essential to the success of each franchise unit, and thus the brand as a whole an essential factor. Generally, a franchise is an agreement for a specific period ranging between five and ten years. Advantages of franchising o wne rship m e ntality similar to a dealership, but with more emphasis in franchising, particularly where the franchise agreement is longterm, the franchisee will have an. This is the cornerstone concept of franchising, and it also results in one of the most important benefits of a franchise network brand expansion. The main disadvantage of buying a franchise is that you must conform to the rules and guidelines of the franchisor. This article will explore different growth strategies with a particular emphasis on franchising, which is the most highly regulated of the growth strategies analyzed. Franchisor advantages and disadvantages table in a level. Advantages and disadvantages of a franchise business opportunity. In addition to the initial franchise fees ongoing fees are payable by you to the franchisor. Advantages and disadvantages for franchisors and franchisees free download as word doc.
What are the advantages and disadvantages of owning a franchise. How the business operates is set out by the brand of the franchise and it is very rare that a. Apr 15, 2019 as with starting any small business, there is always risk. What are the disadvantages of franchising a business. Differences between franchisor and franchisee franchisors offer and sell franchise opportunities to prospective franchisees. Its faster because other people are out there helping you in the process.
Table 1 advantages and disadvantages of franchising advantages of franchising for the franchisor for the franchisee 1. The advantages and disadvantages vary depending on. Franchises offer the independence of small business ownership supported by the benefits of a big business. The franchisor needs to remember that each franchisee is a business owner in his or her own right and respect that. There are many benefits of franchising but there are also a number of drawbacks to consider. The franchisor will also lose handson involvement with the individual operations and the franchisor will also be limited by contract to the actual changes which can and may incur in. As a franchisor there are several opportunities that are now open to you though not all. In short, if the franchisee is happy, the franchisor will be happy.
We represent excellence in franchising education and advocacy. Its certainly an appealing option though there are admittedly advantages and disadvantages to franchising in canada. The disadvantages to franchising are that the franchisor will lose control over certain aspects of the job. Other advantages a franchisor may enjoy can be directly attributed to the advantages that a franchisee will enjoy. With the former, the franchisee purchases the right to the original companys name and trademark.
The process is highly regulated by the franchisor so that the success can be replicated by the franchisee. Indeed, there are certain advantages and disadvantages of being a franchisee. What are the advantages and disadvantages of franchising to. The broad scope of the franchise laws may apply to a.
Depending on the franchise agreement, the franchisor may be able to dictate certain. Franchising has a number of advantages and it is a perspective form of interaction. Mar 17, 2017 other advantages a franchisor may enjoy can be directly attributed to the advantages that a franchisee will enjoy. Franchisor franchisee owns trademark or trade name. Franchisees cannot be managed as closely as employees and they may have different goals to the franchisor. Apr 04, 2018 there is significant variation but it is useful to understand the franchisors point of view. Most franchisors encounter the following disadvantages. Because the franchisee owns the business, he or she, to a great extent, determines the success of the venture. If you are looking to sell franchises, a franchisee is going to go out and find a site, theyre going to negotiate the lease, theyre going to hire the people, theyre going to train the people, theyre going to hire the contractor. What are the advantages and disadvantages of becoming a franchisor. The article describes the features of the development of franchising in russia. Therefore, over time, franchisees begin to think that the royalties that they pay. Listed below are some advantages and disadvantages of buying a franchise. During this period, the business may witness several ups and downs.
Some franchisors exert a degree of control that you, as a supposedly independent business owner, may find excruciating. The franchisor will also lose handson involvement with the individual operations and the franchisor will also be limited by contract to the actual changes which can and may incur in the franchise units operation structure. Although franchisees are independent business owners, they must operate under the terms spelled out in the franchise agreement. A business may increase growth by building additional outlets regionally, nationally, or internationally. Other ways to realize your dreams through business ownership include buying a business opportunity and. There is significant variation but it is useful to understand the franchisors point of view. The franchisor has the responsibility to ensure the franchisee is adhering to the agreement, which typically covers areas such as operating procedures, use of trademarks and logos and allowable marketing procedures. Franchising is a good way to get more money and success for your company. Buying a franchise can be a viable alternative to starting your own business. Differences between franchisor and franchisee internicola.
Jan 30, 2015 becoming a franchisee removes the need to build a brand, establish systems and processes and train staff, which can be appealing. The advantages of franchising your business are listed in detail below but they all revolve around the fact that franchising will permit you to expand your. Advantages and disadvantages of franchising buying a franchise can be a quick way to set up your own business without starting from scratch. The inherent risks usually associated with expansion are thereby reduced. Advantages and disadvantages to franchising your business. What are the advantages and disadvantages of franchising. However, according to carlos garcia, the franchisor of total clean, franchising is not an easy way to grow your business.
However, it also removes some of the flexibility and autonomy that an outright business owner might enjoy. Other ways to realize your dreams through business ownership include buying a business opportunity and creating a business from the ground up. Advantages to the franchisor include the opportunity to expand its business without investing much of its own money. We are going to talk about business format, where the franchisor provides full products and services. What are the advantages and disadvantages for the franchisee. Were here to support your growth, connect our community, and protect our business model. A franchise operation is a contractual relationship between the franchisor and franchisee in which the franchisor offers or is obligated to maintain a continuing interest in the business of the franchisee in such areas as knowhow and training. May 07, 20 the pros and cons of franchising your business. 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. There are 5 main disadvantages to buying a franchise.
While franchisees own their units, they must compensate the franchisor, typically in the form of royalties based on unit sales. Pdf this report is an attempt to compare the advantages and disadvantages of franchising which is one of the most known business model. Advantages and disadvantages of franchisor answers. Disadvantages of franchising to franchisor and franchisee. Buying a franchise is not cheap, there is usually an up front franchise fee on top of the cost of the premises, equipment and inventory. For these reasons, an education program for franchising.
The following is a general description of the various growth strategies, including the advantages and disadvantages to each. Advantages and disadvantages of franchising 2315 words. Advantages and disadvantages for franchisors and franchisees. This article sets out the the advantages and disadvantages of franchising for the franchisor. No prior experience is needed as the training received from the franchisor should ensure the franchisee establishes the skills required to operate the franchise. The franchisor provides all the necessary training to the franchisee or small business staff and provides additional resources and decisionmaking capabilities to a small business. The franchisor may have a great program and a respected name, but in the final analysis much of the risk is in the franchisees hands. An example of the use of swot analysis is used to identify the advantages, disadvantages, threats and opportunities of franchising 12, where this analysis could help organizations, projects or. Advantages and disadvantages of franchising as a form of business. Becoming a franchisee removes the need to build a brand, establish systems and processes and train staff, which can be appealing. In a franchise business, the franchisor provides a developed way of doing business, ongoing guidance, systems and assistance in return for periodic payment of fees andor purchases. Under this, dealers were given the right to distribute goods for a manufacturer. Pdf determining pros and cons of franchising by using swot.
Preservation by franchisees of their eco nomic and legal independence. A more detailed explanation of each item is listed at the end of the table. Reputation may be adversely affected by franchisees. Advantages and disadvantages of franchising nibusinessinfo. Advantages and disadvantages of franchising commerce essay. For this right, the dealer pays a fee for the right to sell the trademarked goods of the producer. The advantage of the system is that there is a blue print for success, a track record and proven formula. Expansion can be faster because franchisees provide the labour and their sales provide the growth. A franchisor, pursuant to an fdd, offers and sells franchises whereby a franchisee is granted the right and obligation to establish a franchised location using the franchisors systems, knowhow and licensed marks. With this a franchisor faces certain advantages and disadvantages that come with owning a franchise. This may be a combination of both structured and scheduled.
Advantages of franchising o wne rship m e ntality similar to a dealership, but with more emphasis in franchising, particularly where the franchise agreement is longterm, the franchisee will have an attitude of. Franchising is an opportunity to become your own boss and pursue your passion for small business ownership while plugging into an established brand and network willing to help. Select a franchisor that you can build a relationship with. Marketing is also carried out by the franchisor, allowing the franchisee. Below is a summary table of advantages and disadvantages of becoming a franchisee. A franchise must include a franchisor and at least one franchisee the franchisor is the business or individual that sells the right to use its products or services to another business or individual. So this is an extremely important topic that does require some evaluation. The following are some of the disadvantages of buying franchise. Depending upon the nature of the business, this could mean adding additional retail. The appeal of a business format franchise is understandable. Select a franchisor that takes customer satisfaction seriously. The use of the brand, which has won the loyalty of customers and a. The source of conflict lies in the fact that the royalty rate paid to the franchisor remains constant over time.
Additionally, the franchisor may make training available to the staff of the franchisee, as well as the franchisee themselves. Advantages and disadvantages of franchising to understand the advantages and disadvantages of owning a franchise business you need to have a basis for comparison. The first and most significant disadvantage of a franchise is the fact that the franchisee has no control of the business or how it is run or very limited control. 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. Advantages and disadvantages of buying a franchise business. Now the big advantages of franchising are time, people and money. By training a franchisees staff, the franchisor can ensure greater consistency of frontline customer service standards, and alleviate the franchisee of the burden of conducting their own training. The franchisee sells the product or service that the franchisor supplies. The most obvious benefit of franchising to a prospective franchisor is the ability to expand a business by utilising the manpower and capital of others. Franchise advantages and disadvantages metropolitan movers. Advantages and disadvantages of being a franchisee infographic. The table below shows the advantages and disadvantages of franchising for the franchisee.
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