These are brand recognition, low risk to failure, easy set up, ready customer portfolio and easy to. However you should be aware that franchising is not suitable for every business. The disadvantages to franchising are that the franchisor will lose control over certain aspects of the job. 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. The advantages and disadvantages vary depending on. Firstly, franchising is a great way to expand a business without incurring additional costs on expansion. Franchising meaning, examples, advantages, disadvantages.
Each growth strategy has its own advantages and disadvantages, and each has its own legal ramifications. Y in order to determine whether there are more advantages or disadvantages. Other ways to realize your dreams through business ownership include buying a business opportunity and creating a business from the ground up. Franchising meaning, advantages, disadvantages it brings together the titleholder of recognized merchandise with another business. Franchises have benefits, proven ideas and brand names but the franchisor may restrict how you run the business. Franchising, licensing, contract manufacturing pros and cons. What are some advantages and disadvantages of franchising. Expansion can be faster because franchisees provide the labour and their sales provide the growth. Advantages and disadvantages of franchising advantages to franchisors. Under this, dealers were given the right to distribute goods for a manufacturer. Advantages and disadvantages of franchising howandwhat. Franchisees cannot be managed as closely as employees and they may have different goals to the franchisor. Limitations on independence an important feature of franchising is that every aspect of the business format i. Preservation by franchisees of their eco nomic and legal independence.
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. The ifa educational foundation an introduction to franchising 5 an introduction to franchising a franchise is the agreement or license between two legally independent parties which gives. Franchises offer the independence of small business ownership supported by the benefits of a big business network. The use of the brand, which has won the loyalty of customers and a good. The objective of this study is to examine the advantages and disadvantages of franchising hotel operations. Understanding the advantages and disadvantages of franchising will enable you to decide if franchising is a suitable option for your business expansion. Pdf determining pros and cons of franchising by using swot. You may find it easier to secure finance for a franchise. 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 typically requires less money and personnel to set up the franchise. Disadvantages of franchising to franchisor and franchisee. Franchises have a higher rate of success than startup businesses.
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. Pdf determining pros and cons of franchising by using. International franchising advantages and disadvantages. Pdf this report is an attempt to compare the advantages and disadvantages of franchising which is one of the most known business model. 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. Table 1 advantages and disadvantages of franchising advantages of franchising for the franchisor for the franchisee 1.
What are the advantages and disadvantages of franchising. 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 well. The fact of the rapid spread and rapid development of franchising is, firstly, to mutual benefit for both the franchisor and the franchisee and, secondly, to reduce the. The franchise agreement usually includes restrictions on how you can run the business. Advantages and disadvantages of franchising commerce essay. The broad scope of the franchise laws may apply to a. 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 franchise agreement usually includes restrictions on how you can run the. The advantage of the system is that there is a blue print for success, a track record and proven formula. If you want to franchise your business so if you are a successful business owner and you want to expand then naturally franchising is an option that you will want to consider. Franchising refers to the granting of the right by a parent company the franchisor to another, independent entity the franchisee to do business in a prescribed. Advantages and disadvantages of franchising as a form of business. Expansion can be faster because franchisees provide the labour and their sales provide the growth, franchisees. Owning a franchise allows you to go into business for yourself, but not by yourself.
The purpose of franchising is, at its root, a method of marketing or advertising a companys goods and services. This further also helps in building a brand name, increasing goodwill and reaching more customers. Advantages disadvantages of franchising free download as pdf file. Advantages and disadvantages to franchising your business. Download 10page research paper on franchising of hotels.
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. This strategy can be opted by small businesses by having a brand name of a wellknown company associated with it. Running your own business is a cornerstone of the american dream. 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 franchising before we start talking about advantages and disadvantages of franchising, let us first look into the definitions of 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. Advantages and disadvantages of buying a franchise business. 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. International franchise benefits include worldwide expansion of the business without giving up control or requiring extensive capital, since the franchisee provides this. Advantages of international franchising franchising is a unique form of business arrangement.
The use of the brand, which has won the loyalty of customers and a. This is because all expenses of selling are borne by the franchise. Weighing the advantages and disadvantages of franchising, as outlined above, will hopefully help you determine if franchising is the right path for you. The advantages of franchising described in the last chapter come at a cost. 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. Advantages and disadvantages if you buy a franchise, you get all the advantages of remaining selfemployed, but you mitigate the risks by being part of a proven business that typically has a customer base ready and waiting. Franchisees use the trademark and strategies of parent company i. Franchising is a business strategy in which franchiser owner of the business, product or services, affiliate with franchisees dealers of products for distribution, business expansion, and marketing. Most franchisors encounter the following disadvantages. Some franchisors exert a degree of control that you, as a supposedly independent business owner, may find excruciating. Advantages and disadvantages of franchising to understand the advantages and disadvantages of owning a franchise business you need to have a basis for comparison. If youre considering buying into a franchise, knowing the advantages as well as disadvantages can help you best decide if this is the right venture for you. The process is highly regulated by the franchisor so that the success can be replicated by the franchisee. Advantages and disadvantages of franchising free essay example.
The cost to set up a franchise system can be recovered over time through franchisees paying initial franchise fees. For this right, the dealer pays a fee for the right to sell the trademarked goods of the producer. 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. Advantages and disadvantages of buying a franchise. How the business operates is set out by the brand of the franchise and it is very rare that a. Owning a franchise can be a shortcut to success when youre starting a business, but there are franchising advantages and disadvantages to consider. The many advantages and disadvantages of owning a franchise should be carefully evaluated before deciding to purchase one. Listed below are some advantages and disadvantages of buying a franchise. When an individual buys a franchise, he or she purchases the years of experience and the proven operating system of the franchisor. Retail marketing hearing the success stories of a franchise model usually prompts individuals to make an investment in it. There are several areas in franchising that can be considered disadvantages if not fully understood. 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. The rules of the business are already established and part of the franchise agreement.
Generally, a franchise is an agreement for a specific period ranging between five and ten years. If you do choose to embark on the franchising route, the following are important things to keep in mind. Franchising is an excellent way of expanding a business that is already successful. 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 your business.
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