Submitted by: Submitted by louther
Views: 190
Words: 1372
Pages: 6
Category: Business and Industry
Date Submitted: 09/24/2012 05:30 PM
Advantages & Disadvantages of Franchising
For a franchised network to be successful in the long term, both the
franchisor and the franchisees must derive from the arrangement solid
and enduring benefits which otherwise would not be readily available
to them. Although the expectations of the expectations of the
franchisor and all franchisees within a network tend to converge,
their perceptions of the advantages to be gained from the arrangement
will differ somewhat, as the following paragraphs show.
Advantages form the franchisor's viewpoint
An entrepreneur who considers the expansion of his business has
various options open to him, including the establishment of branches,
entering into joint venture agreement s, contracting with distributors
- or setting up a network of franchisees.
To set up branches or, to a lesser extent perhaps, enter into joint
venture operations, would entail a large investment in infrastructure
and working capital. Both options would also make huge demands on
management time and have the potential to create HR problems as well.
The appointment of distributors would address many of these problems,
but control would be lost.
A franchise network enables the entrepreneur to realize his expansion
plans on the basis of an investment made by franchisees. Those
franchisees, having made a substantial investment in their own
businesses, can be relied upon to maximize market penetration and
operational efficiencies on an ongoing basis, and to deal with
emergencies as they arise.
But while franchisees can be expected to finance and manage their own
outlets, the franchisor retains overall control over the brand and its
development in the widest sense of the word. As a result, expansion
can proceed at a much faster pace than would otherwise be possible,
enabling the franchisor to achieve national market penetration and
increased market share whilst benefiting from the resulting...