Example essay on franchise advantages and disadvantages will inspire you. Advantages and disadvantages of buying a franchise. Quite often people are under the mistaken belief that the advantages outweigh the disadvantages, but this is because they are commonly blinded by the potential risks of starting a new business from scratch. Advantages and disadvantages of franchising commerce essay. The broad scope of the franchise laws may apply to a. The many advantages and disadvantages of owning a franchise should be carefully evaluated before deciding to purchase one. There are definite advantages and disadvantages to owing a franchise business over these other career or business ownership options but to know which path is. Determining pros and cons of franchising by using swot. Advantages and disadvantages of franchisor answers.
The advantages and disadvantages of franchising samsung. The cost to set up a franchise system can be recovered over time through franchisees paying initial franchise fees, royalties, and other fees to the franchisor. The use of the brand, which has won the loyalty of customers and a. Ive decided to list the disadvantages first, to in some way attempt to counterbalance my natural tendency to be an advocate for franchising, given my 25plus years. Buying a franchise can be a viable alternative to starting your own business. Advantages and disadvantages of buying a franchise business. That you need no much capital, with low investment people can buy the franchise and setup business easily. International franchising advantages and disadvantages. Owning a franchise can be a shortcut to success when youre starting a business, but there are franchising advantages and disadvantages to consider. Running your own business is a cornerstone of the american dream. Disadvantages of franchising to franchisor and franchisee.
In the third part, the disadvantages of franchising are explained. The advantages and disadvantages of franchi s ing this memorandum, produced for a number of our clients considering franchising, brings together a bullet point list of the advantages and disadvantages both business and legal of moving to a franchised system of operation. Most franchisors encounter the following disadvantages. Advantages and disadvantages of franchising to understand the advantages and disadvantages of owning a franchise business you need to have a basis for comparison. Franchising is advantageous to both franchisee and franchisor in the following ways.
Disadvantages of franchising for the franchisor for the franchisee 1. Expansion can be faster because franchisees provide the labour and their sales provide the growth. The pros and cons of franchising your business before you take the first step to turn your business into a franchise, read these advantages and disadvantages of franchising. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor. Follow the dos and donts for franchisees in order to find the right franchisor for your type of need and desires. The advantage of the system is that there is a blue print for success, a track record and proven formula. The table below shows the advantages and disadvantages of franchising for the franchisee. Pdf determining pros and cons of franchising by using. Many franchise systems do not require a specific qualification or work. Take note, however, that the pros far outweigh the cons. You may find it easier to secure finance for a franchise. 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.
Advantages and disadvantages of franchising as a form of business. Advantages of international franchising franchising is a unique form of business arrangement. One does not have to develop an advertising strategy or solid branding as this is done by the franchisor. Franchising advantages and disadvantages of franchising. Franchises have a higher rate of success than startup businesses. Decide if you want to be a business owner with an established plan and community. Developing a franchise network can be expensive, in terms of management time and initial capital outlay. This article will explore different growth strategies with a particular emphasis on franchising, which is the most highly regulated of the growth strategies analyzed. During this period, the business may witness several ups and downs.
The answer will depend and vary depending on who you are and what your goals are. 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. 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 industries where you most often find this type of franchising are soft drink distributors, automobile dealers and gas stations.
Understanding the advantages and disadvantages of franchising will enable you to decide if franchising is a. Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. Hence, buying a franchise is so far safer than trying to start a business. The process is highly regulated by the franchisor so that the success can be replicated by the franchisee. In product distribution franchising, the franchisor licenses its trademark and logo to the franchisees but typically does not provide them with an entire system for running their business. Listed below are some advantages and disadvantages of buying a franchise. A franchisor expands his business through franchising as it offers certain advantages. Table 1 advantages and disadvantages of franchising advantages of franchising for the franchisor for the franchisee 1. Advantages and disadvantages of franchising your business.
International franchise benefits include worldwide expansion of the business without giving up control or requiring extensive capital, since the franchisee provides this. In other words, this type of franchising provides the franchisee with a complete business format including license for a trade name, the product or service to be marketed, the physical plant, methods of operation, a marketing strategy plan, a quality control. So this is an extremely important topic that does require some evaluation. Hiding by franchisee important information and submitting false information. Just as with any business model, there are disadvantages to setting up a franchise. The franchisee sells the product or service that the franchisor supplies. Even though franchising has some advantages, buying a franchise has some major drawbacks. Business growth advantages and disadvantages to franchising your business. Other ways to realize your dreams through business ownership include buying a business opportunity and. Pdf determining pros and cons of franchising by using swot.
There is a substantial amount of benefits that franchising offers to both the business and franchise owner, but with anything that seems this great, there are pit falls to the franchise world as well. Each franchise agreement requires franchisees to use the name, branding, recipes and practices of the franchisor. Before franchising your business, it is important to understand the advantages and disadvantages about franchising your business. Franchising typically requires less money and personnel to set up the franchise.
What are the advantages and disadvantages of owning a franchise. What are the advantages and disadvantages for the franchisee. The franchisees lack of basic or specialised knowledge is overcome by the training programme of the franchisor. 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. Some franchisors exert a degree of control that you, as a supposedly independent business owner, may find excruciating. He has an indirect and partial hold in the running of the business and it is seriously considered one of the main disadvantages of franchising. Here we cover some of the very important aspects for business franchising. Their way or the highway the main disadvantage of buying a franchise is that you must conform to the rules and guidelines of the franchisor. Expansion can be faster because franchisees provide the labour and their sales provide the growth, franchisees. One way of reducing that risk is to consider buying a franchised business.
This report is an attempt to compare the advantages and disadvantages of. There are a lot of advantages and disadvantages of franchising business, lets have look. Indeed, there are certain advantages and disadvantages of being a franchisee. Advantages and disadvantages of franchising essay example. The risk of loss of reputation associated with the failure o f the franchisee manuals, instructions, standards and other necessary conditions. Table 1 advantages and disadvantages of franchising. Franchises have benefits, proven ideas and brand names but the franchisor may. The disadvantages to franchising are that the franchisor will lose control over certain aspects of the job. Considered buying a franchise but unsure whether its the right direction for you. Take a look at the advantages and disadvantages of franchising and working with an established brand. This is the cornerstone concept of franchising, and it also results in one of the most important benefits of a franchise network brand expansion.
There is significant variation but it is useful to understand the franchisors point of view. If you consider from the viewpoint of a franchisor then as soon as he says yes to opening a new franchise he delegates his responsibility to others and loses control over the new operation. When franchisor sells the complete business format and system of hisher product to the franchisee, it is called pure franchising. Advantages and disadvantages to franchising your business. The following excerpt from the franchisees guide mendelsohn, pp2734, lists the advantages and disadvantages of franchising for potential franchisees to consider. We are reading the advantages of franchising and the first thing about buying a franchising. Franchise laws are particularly technical in their application for example, if a franchisor provides only 9 days of presale disclosure rather than the required 10. Advantages and disadvantages of being a franchisee. Under franchising, the service provider develops the business format and licenses it to others. Those with a unique business idea and the right amount of drive and capital tend to build their own company from the ground up, while others prefer to enter the business arena by buying into a wellestablished franchise. If the franchisor crumbles it can take all its franchisees with it, even if they are successful businesses in their own right. Franchisees cannot be managed as closely as employees and they may have different goals to the franchisor. As a franchisor there are several opportunities that are now open to you though not all will be as beneficial to the company as you think. Advantages and disadvantages of franchising for franchisors.
Advantages and disadvantages of business franchising. The original company called the franchisor enters into a contract with a second business called the franchisee in which the original company offers the second business the right to operate under the original businesss name and the right to sell. This report is an attempt to compare the advantages and disadvantages of franchising which is one of the most known business model. Franchising is a good way to get more money and success for your company. Though franchising has several advantages it still. The balance small business advantages and disadvantages of owning a franchise.
However you should be aware that franchising is not suitable for every business. Franchising is an excellent way of expanding a business that is already successful. Tried and true method franchising has been a way of business expansion for nearly 200 years. Preservation by franchisees of their eco nomic and legal independence. What are the advantages and disadvantages of franchising. The franchise agreement usually includes restrictions on how you can run the business. Generally, a franchise is an agreement for a specific period ranging between five and ten years. Owning a franchise allows you to go into business for yourself, but not by yourself.
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