As Wikipedia.org states it: “Franchising is a method of doing business wherein a franchisor licenses trademarks and tried and proven methods of doing business to a franchisee in exchange for a recurring payment, and usually a percentage piece of gross sales or gross profits as well as the annual fees.” franchising is a big business in the US. It’s not only the likes of McDonald’s, Burger King, Dominoes, and other big players that are offering franchise opportunities. There are many small and medium companies offering franchising models too. Product distribution franchisee simply sells the product manufactured by the franchisor for example Pepsi, Ford, etc.; while a business format franchisee uses a franchisor’s product, service and trademark, along with the complete method to conduct the business itself, such as the marketing plan and operations. Examples of such a model are fast food chains, retail outlets, convenience stores, educational institutions, etc.

Advantages of franchising:

- Franchisees can start up their own business fast without the hassles of thinking of a business plan and model; they can just follow the proven trademark and open shops.
- Franchisors offer complete support and training to their franchisees, so you do not have to worry about a lot of business and marketing related issues.
- Franchisors can expand across countries and build their network of franchisees.
- Consumers are also more confident in using well-known products offered by bigger franchisors; by becoming a franchisee, you will get business immediately as a result of pre-existing brand image.
* Franchisees face lower investment risks by associating with bigger entities.

Disadvantages of franchising:

- Franchisees can face a significant loss of control over their business as they have to meet the franchisor’s goals.
- Franchisees must follow the contract and take franchisor’s approval in case of any changes in the operational format.
- Franchisees can find it expensive to pay franchisee fee, royalties, and operational costs that comes with maintaining consistency.
- Franchisee-Franchisor relationship can be a bit strained if they are not at the same level of understanding.

This entry was posted on Sunday, July 22nd, 2007 at 10:13 am and is filed under Franchise 101, Franchise Articles, Franchise News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.