What are the advantages of franchising?

Advantages of Franchising

Under franchising, the service provider develops the business format and licenses it to others. A franchisor expands his business through franchising as it offers certain advantages. Franchising is advantageous to both franchisee and franchisor in the following ways.

1. Business Expansion: Franchisee helps to leverage business format for greater expansion and revenue. Most service companies want to franchise their business concept in order to achieve wider distribution of services. Wider distribution of services leads to increased revenue, market share, brand recognition and economies of scale.

The service provider can minimize investment and financial risks by sharing them with the franchisees.

2. Franchising helps to maintain quality of service: Maintaining consistent quality is another big advantages of franchising. Franchisors give clear instructions to the franchisee with regard to the distribution of services. Franchisees are required to follow their unique business formats and deliver services strictly according to the specifications of the service provider.

The franchisor closely monitors all the activities of the franchisee with respect to hiring and training of employees, layout and design of the premises, etc. As the franchisor exercises a strict control over the operations of the franchisees, maintaining a consistent quality of service is possible.

3. Franchising helps to gain knowledge of local market: When the franchisor operates at a national level, he may not have a thorough knowledge of the local market. Franchising enables the service provider to understand the prevailing trends in the local market. But national chains are unlikely to understand local markets and the franchisee who hails from the same area.

With franchising, the company obtains a connection to the local market.

4. Franchising helps to minimize financial risk: Franchisee contribute their own capital needed for the purchase of capital equipment and for the maintenance of personnel. So, the service principals are relieved from the botheration of investing a huge capital while operating nationally.

Rather than investing in distribution, they can fruitfully invest in core service production. Franchisees certainly bear part of the risks involved in business.

5. The franchisee can participate in an established business that has strong roots across the market.

6. The franchisee has no risk of initiating a new business. The established business that he is undertaking also minimizes the advertising and marketing expenditure.

7. The franchisee can utilize the expertise of the franchisor in promoting the local business. As the brand name is already established, the franchisee need not take any special efforts.

8. The franchisee can base his business on an established business format.

Leave a Reply

Recent Posts

Recent Comments

Related pages

organizational structures advantages and disadvantagesaverage accounts receivable collection periodmeaning of demotionroles of financial intermediariesgsp money mattersdoctrine of ultra viruscapital budgeting is concerned withsupermarkets definitiondisadvantages of profitability indexmacroeconomic aggregatescurrency swaps meaningpayback methodrequirement of a valid contractmeaning of marine insurancewhat is voluntary winding upadvantages and disadvantages of sole traderwhat is ebqprobability or nonprobability samplingadvantages of npv over irradvertisements lead to wasteful expenditureduty of baileerbi issue departmenttreatment of under and over absorption of overheadsfinancial lease vs operating leaseexample of ultra virescalculating pv factorlabour turnover formulasecuritization in bankingvertical filing systemscrisil india ltdlift the corporate veildefinition of consumer buying behaviourtypes of nonprobability sampling techniqueswhat are the advantages of the seniority systemspeciality goods definitionhow to start a chit fund companycovered perils definitionwhat are the advantages and disadvantages of mixed economyforms of unethical advertisingtypes of vouchingimportance of marketing segmentationpetty cash accounting procedureshow to compute inventory turnoverdumping economicsassociation meaning in urdubudgeting and budgetary control in business organisationteeming and lading fraudsrs samplingretained profits definitionwhat is alphabetic filingexamples of mergers and acquisitionsdefinition of caste system in indiawho is depository participantfranchisor and franchisee advantages and disadvantagesmeaning of ultra viresdisadvantages of e-commerceinventory management meaning in hindidefinition of vertical mergerebusiness vs ecommercesupplier stationerymbo programobjectives and functions of sebisebi actfreehold and leasehold landbrand extensions examplesexamples of probability sampling methodsadvantages and disadvantages of corporationsmethods of depreciation of fixed assetssocialization process examplesraw materials inventory formulawhat are the disadvantages of socialismzero based budgeting stepsadvantages and disadvantages of organizational structureaccounts receivable turnover formuladecentralization refers toconcurrent audit techniquescalculate finished goods inventorymeaning of retailsforfeiting meaning