Advantages and Advantages of franchising

Advantages of franchising

Reduced risk: The franchisee will acquire the right of running an already established business, thus eliminating the risk of starting a new business.

Business expansion: Franchising provides an opportunity to expand business at regional, national and global levels without incurring additional expenditure. Thus rapid growth of franchisor’s business is facilitated.

Cost of advertising: The cost of advertising for the franchisor will be reduced since this cost will be shared  by the franchisee. Moreover, it enables the franchisor to reap the benefits of increased visibility across regional and national boundaries.

Operational support: The franchisee is provided assistance in not only obtaining finance,but also in deciding business location , decor /design, staff training, and handling day to day operations.

Advantages of franchising

Franchising fees: The initial franchising fee and the subsequent renewal fees  can be very high in case of successful businesses. From the franchisee’s point of view, this may be a deterrent.

Fixed royalty payment: The franchisee has to make  payment  of  royalty  to  the franchiser on a regular basis. This considerably reduces the income of the franchisee.

Danger of image tarnishing: If the franchisee does not maintain standards of quality and service; there is a danger that the goodwill and image of the reputed franchiser will be adversely affected.

Lack of freedom: The franchisee does not have the freedom to run his business in an independent manner. He has to abide by management and operational policies of the franchiser, This may serve as a deterrent whether suitable to him or not.

Limitation on range of products: The franchisee cannot introduce new product lines into the business, except those permitted by franchiser. This may mean loss of business to franchisee amidst demands based on local conditions.