Question

Franchising is advantageous for both franchisor and franchisee. Explain five advantages of franchising for the franchisee.

Answer 1

The advantages of franchising for the franchisee are as follows:

1. Product acceptance: The franchisee usually enters into a business that has an accepted name, product or service. He/she doesn’t have to spend resources to establish the credibility of the business and create a market for his product. The credibility already exists based on the years the franchise has existed.
2. Management expertise: Managerial expertise is provided to the franchisee. Each new franchisee is often required to take a training program on all aspects operating the franchise. This training could include classes in accounting, personnel management, marketing and production.
3. Capital requirements: Franchise offers an opportunity to start a new venture with up-front support from franchisor, which saves considerable time and capital for the franchisee.
4. Knowledge of the market: Franchisors are well aware of the existing market conditions. With their experience and knowledge, they can provide advice and assistance to the franchisees for carving out a market for themselves.
5. Operating and structural controls: Two problems that many entrepreneurs have in starting a new venture are maintaining quality control of products/services and establishing effective managerial controls. The franchisor helps the franchisee combat both problems.