Advantages to the Franchiser: i. The franchisor will also lose hands-on 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. Advantages and Disadvantages of a Franchise Agreement, Geographical Pressures to Deviate from Franchise Formats, The Franchise Business Opportunity: Subway Restaurants, Information Systems' Necessary Factors: Strategic Advantages, Business Outsourcing in India, China and the Philippines, The Committee of Sponsoring Organizations: Managing Framework, The Committee of Sponsoring Organizations' Control System. Disadvantages of Franchising. First, franchising denies a business owner the ability to have full control over their entity and its crucial processes, such as decision-making (Seid & Thomas, 2007). Many entrepreneurs think that owning and running a franchise business guarantees more revenue, profit and returns; this is not always be the case, while it may be true for the short term but long term case studies show that starting your own business will be cheaper to run and pay off better than franchising. Initially, there are two things you must need to understand. Your privacy is extremely important to us. Copyright © 2003 - 2021 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. The franchisee does not have to waste all the time, cost of expenditure and the effort in building up company goodwill and establish a famous brand name. Reference this. Weighing the advantages and disadvantages of franchising, as outlined above, will hopefully help you determine if franchising is the right path for you. Do you have a 2:1 degree or higher? Management is responsible most of everything. Pros and cons of franchising your business. The administrative unit of the company is in charge of ordering supplies, hiring employees, and managing communication within (and outside of) the firm. Employees take care of all of the background activities that keep a company running efficiently behind the scenes. Like the advantages, there are many disadvantages excessively as can be in any signifier of concern, nevertheless in this context the disadvantages. Table 1 – Advantages and disadvantages of franchising Advantages of franchising For the franchisor For the franchisee 1. Advantages and disadvantages of franchising, and advice I would give to an entrepreneur who is evaluating a franchise opportunity The advantages for the franchisee The franchisor franchisee relationship is symbiotic-each party provides the other something beneficial it would not have been able to provide for itself. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. The management would handle the production duties and make various and different strategic plans for the company to follow. Enter new markets and expand reach and scale of operations. A lot of thought must go into owning and running a franchise and is not an easy job and it is a lot to consider. Franchising a business or buying a franchise from franchisor. The advantages of franchising from the franchisee’s point of view are myriad, most important among them are: First, the franchisee can benefit from the widely recognised by the style of branding name of the franchisers around everywhere. IvyPanda. To run a successful franchise one has to study the market, the franchisor and the product carefully and judiciously. Second, all the goodwill accumulated by the franchisee in the local market will be transferred to the franchisor once the franchise contract expires or terminates. Read Essay On Advantages And Disadvantages Of Franchising and other exceptional papers on every subject and topic college can throw at you. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! National reputation – The presence of any one of these franchises may bring out the best of the country and also improve the high status of the host country. Any information contained within this essay is intended for educational purposes only. You are free to use it for research and reference purposes in order to write your own paper; however, you must. If a company is a reseller, then the operating cycle does not include any time for production – it is simply the date from the initial cash outlay to the date of cash receipt from the customer. The primary advantages of franchising from the perspective of the franchisor … It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. The disadvantages of franchising revolve around the concept of independence. Essay text: These advantages and disadvantages will be discussed in this paper. Even though the franchisee may be better able to handle and organise the business but because they are tied to the brand they’re representing therefore makes business operations difficult. The disadvantages to franchising are that the franchisor will lose control over certain aspects of the job. This may not always be the case and it is often found that in the long run running an original business gives higher returns. https://www.toppr.com/.../emerging-trends-in-business/franchising The disadvantages to franchising are that the franchisor will lose control over certain facets of the occupation. Though all business have their pros and cons, franchising and running a franchise has with it a lot to consider and the proper decisions and actions must be taken in order for the business to succeed and prosper. For small business who cannot afford for much finance and capital investment for a business startup, franchising will be beneficial. Toward this end, this study will conduct an extensive review of literature in this area of inquiry as well as interview two individuals, Mr. X, and Mr. Y in order to determine whether there are more advantages or disadvantages. Before signing a franchise agreement, prospective business owners should ensure that they are comfortable with the performance, reputation, and overall operational setup of the franchisor. When a franchiser is around ,it can only mean one thing that is the franchise is well known around and among people, reputed company with extensive customer base and immense brand name recognition. If you continue, We can custom-write anything as well! This helps to ensure that the business agreement comes to fruition by ensuring the satisfaction of everyone involved (Seid & Thomas, 2007). Advantages And Disadvantages Of Franchising Commerce Essay. The primary disadvantages of franchising from the perspective of the franchisee are that the franchisee must pay a royalty fee and must comply with rigorous quality and control procedures established by the franchisor. This is especially true for a very small company — one cog in the wheel can jam up operations. The laws of franchising … 2020. Experts argue that buying a franchise involves acquiring a successful business that already has a good image, reputation, and a sizeable market share (Seid & Thomas, 2007). Given all the information, a owning and running a franchise is a risky business as is with all business but people do so with government encouragement and because they think that running a franchise will guarantee a bigger or higher profit or income. Despite all the positives, experts also argue that franchising has a number of disadvantages, especially for the buyer. Home; Uncategorized; Advantages and Disadvantages of Franchising; mistakes entrepreneurs make July 8, 2019. Web. 15 Advantages and Disadvantages of Franchising your Business. ⏰ Let's see if we can help you! Franchising can be a good option to own a business, especially for first-timers. Menu. Costs may be higher than you expect. Eight disadvantages of franchising. Search. In this modern era of globalization, a company’s operations segment is the unit that manages and supports the company. IvyPanda. We're here to answer any questions you have about our services. Neither pros nor cons, they are part of the obvious and often overlooked realities of franchising. The cost will automatically increase due to taxes imposed by respective governments. Thus, several management decisions (or negotiated issues with business partners) can impact the operating cycle of a business. May 25, 2020. https://ivypanda.com/essays/franchising-advantages-and-disadvantages/. These can only tell one thing is that franchisors are upcoming throughout the entire world and it will not stop blooming due to the fact of its importance around as all the researches shows. Franchising – Meaning, Advantages, Disadvantages. The operating cycle is useful for estimating the amount of working capital that a company will need in order to maintain or grow its business. Which will end up costing the franchisee a lot of time effort and money just as it will the franchiser. Technologies LLC, a company registered in Wyoming, USA. Steady income in the form of royalties. The franchisor’s best interest is having each of … It is necessary that he has to adhere to the standards, policies, procedures and functioning systems of the franchisor. Advantages and disadvantages of franchising. Conflict may arise between the franchisee and franchisor when territorial exclusivity is breached or when trademark issues or renewal rights are disputed. (2020) 'Franchising Advantages and Disadvantages'. What’s your deadline? Need a custom Assessment sample written from scratch by The main disadvantage of buying a franchise is that you must conform to the rules and guidelines of the franchisor. Prices; How It Works; Our Services ... Order Now; Home; About Us; Terms and Conditions; Order Now; My Account. Franchising entails establishing or operating a business under an authorization to sell or distribute a company’s goods or services in a particular area (Seid & Thomas, 2007). The order fulfilment policy, since a higher assumed initial fulfilment rate increases the amount of inventory on hand, which increases the operating cycle. People who buy a franchise are often trained by their mother’s business on how to operate a business using their model, thus increasing the chances of having a strong start. Second, buying a franchise allows a business owner to have a quick start characterized by higher sales, huge profits, and better equity because a lack of experience does not affect performance very much (Sherman, 2011). Consumers benefit the most from franchising because they get a chance to have increased access to quality goods and services from reliable entities. First, a franchise owner enjoys the independence of operating under a big and reliable business network (Sherman, 2011). You might not be able to make changes to suit … There are agreements that have to be prepared such as the Uniform Franchise Offering Circulars (UFOCs). A typical operating cycle includes the days of inventory outstanding before sales, the days of accounts receivable outstanding before cash collection, and the days of accounts payable outstanding before cash payments. Commerce If you do choose to embark on the franchising route, the following are important things to keep in mind. Identify one franchise property in your local market. Certainly, the majority of people would choose to start their own business rather than get tied in with a franchise … Study for free with our range of university lectures! We use cookies to give you the best experience possible. 2. Essays; Economics; Advantages and Disadvantages of Franchising. This helps a lot because then the employee doesn’t need to disturb the employers for any information but just directly go through the manual. Copyright © 2021 - IvyPanda is a trading name of Edustream Franchise owners should know that the success of a franchisor does not automatically make their business success because they will have to manage their entities well. When a franchisee invests in a host country, the scale of the investment is likely to be very large and cause a lot of economic activity in whichever market it establishes itself in. *You can also browse our support articles here >. Buying a franchise has both advantages and disadvantages. 1. The primary advantages of franchising from the perspective of the franchisee are the provision of a recognizable consumer brand, tested product and service concepts, technical assistance in the areas of site selection, facility construction and interior design, training, marketing support, and financial controls. These companies are not stopping to open their franchisors around the world because these franchisee knows very well that the market globally demands the franchisors to be around. 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. IvyPanda, 25 May 2020, ivypanda.com/essays/franchising-advantages-and-disadvantages/. Operations employees don’t usually come in direct contact with customers and end users, though they are responsible for helping to ensure that customers ultimately receive the product or service that the company promises. Franchises have to follow the business model used by their franchisor, thus limiting the ability of a business owner to be creative. It is a form of business by which the franchisor of a product, service, or method … If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. The disadvantages to franchising are that the franchisor will lose control over certain aspects of the job. The franchisor will besides lose hands-on engagement with the single operations and the franchisor will besides be limited by contract to the existent alterations which can and may incur in the franchise … Obtaining additional income. IvyPanda. The agreement signed by both parties stipulates the limitations, rights, duties, and responsibilities of each party. Since this studies is focused on the franchisor, the advantages and disadvantages of franchising will be viewed from the franchisors perspective. 1st Jan 1970 Web. First, franchising denies a business owner the ability to have full control over their entity and its crucial processes, such as decision-making (Seid & Thomas, 2007). "Franchising Advantages and Disadvantages." It involves writing a contract between a franchisor and franchisee, which defines the business relationship they will have for an agreed period. Many companies have become successful by opening their branches across the country and in some cases the world. This may be true, but franchising, like any other business model has its benefits and drawbacks. This would be very good because all the other host countries which would see the difference, would definitely follow up with their own franchises. ensure the integrity of our platform while keeping your private information safe. This in turn, increases the possibility of success of the business. A franchise cannot introduce a new product or service that is not provided by their franchisor (Sherman, 2011). The disadvantages of franchising revolve around the concept of independence. IvyPanda. Communication is one of the most important things between a franchiser and franchisee, when there is some sort of miscommunication the business is likely to fail. The biggest motivation for people who buy a franchise is the ability to be their own boss, the pride of owning a business, and the convenience that comes with dealing with a brand that people are already familiar with. The primary advantages of franchising from the perspective of the franchisee are the provision of a recognizable consumer brand, tested product and service concepts, technical assistance in the areas of site selection, facility construction and interior design, training, marketing support, and financial controls. It brings together the title-holder of recognized merchandise with another business. Brand equity is important so that the franchises can always gain the specific benefits from the main consumers awareness ,faithfulness and loyalty; on the other hand, it lessens competition during recession. Franchising advantage and disadvantages Franchising is a form of business that benefits all the parties concerned. Fourth, corporate profit margin reduces because of payment of royalties and other associated levies. There are many types of franchising. The marketing unit is in charge of the side of how to attract the customers towards the companies .As in example ,the marketing unit would be the people who publish stuffs about the company in newspapers and magazines. The documents may have to be filed in several states. The following are all factors that influence the duration of the operating cycle: The extended payment terms to the company by its suppliers since the company can delay paying out cash. However the yearly expenses are less than the initial costs of setting up the business and the required documentation. The bigger the power of dependingness of the franchisor company, which definitely has the big organization globally, which has a bigger organization, proves beneficial to the franchisee company, because, the franchisor company has a proven business concept and a thriving operational profile. Both gain so both must contribute. "Franchising Advantages and Disadvantages." Expansion of the market for goods and services. Advantages & Disadvantages of Franchising Franchising is ‘a continuing relationship in which the franchisor (the owner of a company) provides a licensed privilege to the franchisee (the buyer) to do business and offers assistance in organising, training, merchandising, marketing, and managing in return for a consideration. Essay Details. Companies don’t arbitrarily decide an operating cycle because it reflects how in reality business transactions progress from start to finish. McDonald’s is a great example of a franchise, many people have opened this chains of fast food all over their respective countries and to bring benefits to themselves and economies in which they’ve started this .Here are some of the factors of the famous fast food chain we visit frequently, McDonald’s. The franchisor will also lose hands-on 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. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. This strategy can be opted by small businesses by having a brand name of a well-known company associated with it. Preservation by franchisees of their eco nomic and legal independence. May 25, 2020. https://ivypanda.com/essays/franchising-advantages-and-disadvantages/. Each of these have their own separate advantages and disadvantages for both Franchisee and … If you have a secretary to run your small office, this person commonly handles all of your administrative support activities. We will write a custom Assessment on Franchising Advantages and Disadvantages specifically for you for only $16.05 $11/page. Depending on the franchise agreement, the franchisor may be able to dictate certain terms such as the business location; hours of operation; … Creativity in one’s own business is curtailed completely. At first, some advantages are listed, according to Judson (2004,p.139) the business model is proven, so lower risky to the franchisees. The operating cycle is also referred to as the cash-conversion cycle, which is the length of time that a company takes to convert its inventory purchase to sales revenue. There is usually as written operations procedure manual distributed among all the employees to clear out all the confusions. Free resources to assist you with your university studies! we will assume that you agree to our Accept and close . Third, the franchisee does not have much freedom in his business. Advantages. International Franchising Advantages and Disadvantages. The success rate is a result of the help that a franchiser extends to a franchisee. iv. Franchising also means uniformity of procedures, which reflects on consistency, enhanced productivity levels and better quality. 2. Sherman, A 2011, Franchising & Licensing: Two Powerful Ways to Grow Your Business in Any Economy, Cambridge University Press, New Jersey. 2. Looking for a flexible role? How Does the Leadership Style Adopted by the Franchisor Affect the Behavior of the Franchisee? Retrieved from https://ivypanda.com/essays/franchising-advantages-and-disadvantages/. We utilize security vendors that protect and Despite all the positives, experts also argue that franchising has a number of disadvantages, especially for the buyer. Source of tax revenue – Profits of franchises will be subject to local taxes in most cases, which will provide a valuable source of revenue for the domestic government. By their nature, franchises are … IvyPanda. An arrangement for a continuing relationship in which one party a franchisor provides an accredited opportunity to another party the franchisee to do business using its trade name and offers assistance in organizing, training, producing, marketing and managing a good or service in adherence to certain specifications, in return for monetary exchange. Providing employment – FDI will usually result in employment benefits for the host country as most employees will be locally recruited. The franchisees benefit from the training and ongoing support that they receive whilst trying to make their business successful. Read more advantages of franchising. The advantage of the system is that there is a blue print for success, a track record and proven formula. This is IvyPanda's free database of academic paper samples. Years of hard work melts in moments with the transfer. Studies have established that franchises have a very high success rate compared to businesses that start from scratch (Sherman, 2011). Improving the balance of payments – Inward investment will usually help a country’s balance of payments situation. (2020, May 25). VAT Registration No: 842417633. 25 May. Similarly, they have to work with the same suppliers for the sake of quality management and brand development. These benefits may be relatively greater given that governments will usually try to attract firms to areas where there is relatively high unemployment or a good labour supply. Registered Data Controller No: Z1821391. No plagiarism, guaranteed! Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. ii. Published: November 4, 2015 Words: 2531 Introduction "Buying a Franchise offers many benefits over starting a business on your own. Essay Upload; Careers; Login Add new link. Cookies Policy, This assessment on Franchising Advantages and Disadvantages was written and submitted by your fellow student. Technology transfer – Franchises will bring in the best technology and all the kinds of methods that would be new to the host country. Login. Advantages and disadvantages of franchising, and advice I would give to an entrepreneur who is evaluating a franchise opportunity The advantages for the franchisee The franchisor franchisee relationship is symbiotic-each party provides the other something beneficial it would not have been able to provide for itself. Brands name the larger the amount to be prepared such as the Uniform franchise Offering Circulars ( UFOCs.. Up costing the franchisee a lot of time effort and money just as it will the usually! 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