Franchising is an excellent way of expanding a business that is already successful. Advantages and disadvantages to franchising your business. The many advantages and disadvantages of owning a franchise should be carefully evaluated before deciding to purchase one. There are a lot of advantages and disadvantages of franchising business, lets have look.
The risk of loss of reputation associated with the failure o f the franchisee manuals, instructions, standards and other necessary conditions. 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. International franchising advantages and disadvantages. Under franchising, the service provider develops the business format and licenses it to others. Advantages and disadvantages of franchising essay example. The purpose of franchising is, at its root, a method of marketing or advertising a companys goods and services. 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. 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. The advantage of the system is that there is a blue print for success, a track record and proven formula. Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. The use of the brand, which has won the loyalty of customers and a. 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. The industries where you most often find this type of franchising are soft drink distributors, automobile dealers and gas stations. Disadvantages of franchising for the franchisor for the franchisee 1.
Some franchisors exert a degree of control that you, as a supposedly independent business owner, may find excruciating. Franchisees cannot be managed as closely as employees and they may have different goals to the franchisor. Advantages and disadvantages of buying a franchise business. Each franchise agreement requires franchisees to use the name, branding, recipes and practices 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. Franchises have benefits, proven ideas and brand names but the franchisor may. Owning a franchise allows you to go into business for yourself, but not by yourself. Disadvantages of franchising to 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 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. Most franchisors encounter the following disadvantages. Indeed, there are certain advantages and disadvantages of being a 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. Just as with any business model, there are disadvantages to setting up a franchise. Determining pros and cons of franchising by using swot. Example essay on franchise advantages and disadvantages will inspire you. Expansion can be faster because franchisees provide the labour and their sales provide the growth, franchisees. However you should be aware that franchising is not suitable for every business.
Franchising is a good way to get more money and success for your company. Follow the dos and donts for franchisees in order to find the right franchisor for your type of need and desires. Pdf determining pros and cons of franchising by using. The advantages and disadvantages of franchising samsung. The process is highly regulated by the franchisor so that the success can be replicated by the franchisee. Here we cover some of the very important aspects for business franchising. This report is an attempt to compare the advantages and disadvantages of. Decide if you want to be a business owner with an established plan and community. Hence, buying a franchise is so far safer than trying to start a business. 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. One does not have to develop an advertising strategy or solid branding as this is done by the franchisor. These are brand recognition, low risk to failure, easy set up, ready customer portfolio and easy to find financial support. Advantages and disadvantages of franchising commerce essay. The answer will depend and vary depending on who you are and what your goals are.
Franchising is advantageous to both franchisee and franchisor in the following ways. Buying a franchise can be a viable alternative to starting your own business. 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. 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. 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. 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. When franchisor sells the complete business format and system of hisher product to the franchisee, it is called pure franchising. Listed below are some advantages and disadvantages of buying a franchise. So this is an extremely important topic that does require some evaluation.
The broad scope of the franchise laws may apply to a. Franchises have a higher rate of success than startup businesses. This article will explore different growth strategies with a particular emphasis on franchising, which is the most highly regulated of the growth strategies analyzed. Advantages and disadvantages of being a franchisee. Advantages and disadvantages of franchisor answers. Even though franchising has some advantages, buying a franchise has some major drawbacks. What are the advantages and disadvantages of owning a franchise. You may find it easier to secure finance for a franchise. Before franchising your business, it is important to understand the advantages and disadvantages about franchising your business. Expansion can be faster because franchisees provide the labour and their sales provide the growth. Business growth advantages and disadvantages to franchising your business.
Following are, for example, the distinct advantages that franchising provides to the franchisee. Preservation by franchisees of their eco nomic and legal independence. The franchisee sells the product or service that the franchisor supplies. 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. Advantages and disadvantages of franchising to understand the advantages and disadvantages of owning a franchise business you need to have a basis for comparison. Advantages and disadvantages of business franchising. 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. 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. The franchisees lack of basic or specialised knowledge is overcome by the training programme of the franchisor. The following excerpt from the franchisees guide mendelsohn, pp2734, lists the advantages and disadvantages of franchising for potential franchisees to consider. Generally, a franchise is an agreement for a specific period ranging between five and ten years. 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. Other ways to realize your dreams through business ownership include buying a business opportunity and.
Franchising typically requires less money and personnel to set up the franchise. Advantages and disadvantages of franchising your business. Table 1 advantages and disadvantages of franchising advantages of franchising for the franchisor for the franchisee 1. In the third part, the disadvantages of franchising are explained. During this period, the business may witness several ups and downs. A franchisor expands his business through franchising as it offers certain advantages. This report is an attempt to compare the advantages and disadvantages of franchising which is one of the most known business model. Table 1 advantages and disadvantages of franchising. This is the cornerstone concept of franchising, and it also results in one of the most important benefits of a franchise network brand expansion. Advantages and disadvantages of buying a franchise. 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. 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. Take note, however, that the pros far outweigh the cons. Understanding the advantages and disadvantages of franchising will enable you to decide if franchising is a.
Many franchise systems do not require a specific qualification or work. Owning a franchise can be a shortcut to success when youre starting a business, but there are franchising advantages and disadvantages to consider. The disadvantages to franchising are that the franchisor will lose control over certain aspects of the job. Advantages of international franchising franchising is a unique form of business arrangement. Hiding by franchisee important information and submitting false information. There is significant variation but it is useful to understand the franchisors point of view. Tried and true method franchising has been a way of business expansion for nearly 200 years. The balance small business advantages and disadvantages of owning a franchise.
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. Considered buying a franchise but unsure whether its the right direction for you. If the franchisor crumbles it can take all its franchisees with it, even if they are successful businesses in their own right. Advantages and disadvantages of franchising as a form of business. The franchise agreement usually includes restrictions on how you can run the. Developing a franchise network can be expensive, in terms of management time and initial capital outlay. International franchise benefits include worldwide expansion of the business without giving up control or requiring extensive capital, since the franchisee provides this. We are reading the advantages of franchising and the first thing about buying a 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. Though franchising has several advantages it still. Franchising advantages and disadvantages of franchising. The franchise agreement usually includes restrictions on how you can run the business.
One way of reducing that risk is to consider buying a franchised business. Running your own business is a cornerstone of the american dream. That you need no much capital, with low investment people can buy the franchise and setup business easily. What are the advantages and disadvantages for the franchisee.306 188 153 776 251 1575 1460 866 446 1240 922 1184 187 872 1537 49 425 1601 1217 748 468 1494 965 162 165 1542 1015 1158 689 1127 292 1164 419 57 255 764 1043 1412 18 269 329 299 1288 1431 250 975 604 1157