Advantages And Disadvantages Of Franchising Commerce

Table of Content

An agreement for a go oning relationship in which one party a franchisor provides an commissioned chance to another party the franchisee to make concern utilizing its trade name and offers aid in forming, preparation, bring forthing, selling and pull offing a good or service in attachment to certain specifications, in return for pecuniary exchange.

Franchising is a manner of concern which has a batch of different but same subdivisions throughout the universe.The franchisee normally pays a erstwhile franchise fee plus a per centum of gross revenues gross as royalty, and in bend additions instant name and acknowledgment, tried and tested merchandises, standard infrastructural design and interior vitamin D & A ; eacute ; cor, elaborate techniques in running and advancing the concern, preparation of employees and ongoing aid in advancing and bettering the merchandise

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A franchise is normally a chief understanding between the franchise proprietors and the authorities.

Question 1 replies:

The advantages of franchising from the franchisee ‘s point of position are myriad, most of import among them are: First, the franchisee can profit from the widely recognised by the manner of branding name of the franchisers around everyplace. When a franchiser is about, it can merely intend one thing that is the franchise is good known around and among people, reputed company with extended client base and huge trade name name acknowledgment. Brand equity is of import so that the franchises can ever derive the specific benefits from the chief consumers awareness, fidelity and trueness ; on the other manus, it lessens competition during recession. The franchisee does non hold to blow all the clip, cost of outgo and the attempt in constructing up company good will and set up a celebrated trade name name. A branded eating house concatenation will keep its gross revenues and competitory power even in times of recession and immense fight will be about in the catering or cookery industry as the whole trade names name is clearly widely good knowned and recognized and favoured by the people.

Second, franchisee can hold a batch of entree to the chief large sorts of concern direction accomplishments which are seldom easy to acquire a clasp on. The franchiser normally has of import concern accomplishments like: production direction, fiscal direction and selling direction. This in bend, increases the possibility of success of the concern. A franchisee is ever populated in every portion of the universe as they are really good known for what so of all time they do as in catering or multi degree selling and so on. The bigger the power of dependingness of the franchisor company, which decidedly has the large organisation globally, which has a bigger organisation, proves good to the franchisee company, because, the franchisor company has a proven concern construct and a booming operational profile.

Like the advantages, there are many disadvantages excessively as can be in any signifier of concern, nevertheless in this context the disadvantages. The disadvantages to franchising are that the franchisor will lose control over certain facets of the occupation. 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 units operation construction. The requirement to counterbalance the franchisee payment and it outgo to the franchisor can be excessively big a amount ( in some instances ) . The bigger and celebrated the trade names name the larger the sum to be paid. Such

Second, all the good will accumulated by the franchisee in the local market will be transferred to the franchisor once the franchise contract expires or terminates. Old ages of difficult work thaws in minutes with the transportation.

Third, the franchisee does non hold much freedom in his concern. It is necessary that he has to adhere to the criterions, policies, processs and working systems of the franchisor. Creativity in one ‘s ain concern is curtailed wholly.

Fourth, corporate net income border reduces because of payment of royalties and other associated levies.

Many enterprisers think that having and running a franchise concern warrants more gross, net income and returns ; this is non ever be the instance, while it may be true for the short term but long term instance surveies show that get downing your ain concern will be cheaper to run and pay off better than franchising.

Communication is one of the most of import things between a franchiser and franchisee, when there is some kind of miscommunication the concern is likely to neglect. Which will stop up bing the franchisee a batch of clip attempt and money merely as it will the franchiser. Particularly if the franchise is opened in a state overseas. The cost will automatically increase due to revenue enhancements imposed by several authoritiess.

As a franchisee you will non be able to run your concern to your illusion because the franchiser will already hold some kind of concern program. Even though the franchisee may be better able to manage and organize the concern but because they are tied to the trade name they ‘re stand foring hence makes concern operations hard.

Furthermore, if the franchisee is n’t able to continue the franchiser ‘s image and criterions, it will reflect ill on the trade name itself, which will so decelerate concern down for both the franchiser and franchisee and in add-on will do future enterprisers think ill of the company and will take them to non put in the peculiar franchise every bit good.

The success of a franchise depends on both the franchisor and the franchisee, on the merchandise and the concern schemes. To run a successful franchise 1 has to analyze the market, the franchisor and the merchandise carefully and judiciously.

Question 1 decision:

After making my research, what I can reason is that franchising is a great manner to spread out a concern and distribute the name of the franchiser far and broad. A batch of idea must travel into owning and running a franchise and is non an easy occupation and it is a batch to see. But if it is done the right manner and is organised for illustration, if its operating system is being run swimmingly, it will certainly thrive. Many companies have become successful by opening their subdivisions across the state and in some instances the universe. These companies are non halting to open their franchisors around the universe because these franchisee knows really good that the market globally demands the franchisors to be about. These can merely state one thing is that franchisors are upcoming throughout the full universe and it will non halt blossoming due to the fact of its importance around as all the researches shows.

Question 2:

2. Identify one franchise belongings in your local market. discourse about the operation of it and how this belongings helps to better the economic of your country.

Question 2 debut:

In this modern epoch of globalisation, a company ‘s operations section is the unit that manages and supports the company. Employees take attention of all of the background activities that keep a company running expeditiously behind the scenes. Operationss employees do n’t normally come in direct contact with clients and terminal users, though they are responsible for assisting to guarantee that clients finally receive the merchandise or service that the company promises. The operating rhythm of a concern is the mean period of clip required for a concern to do an initial spending of hard currency to bring forth goods, sell the goods, and have hard currency from clients in exchange for the goods. If a company is a reseller, so the operating rhythm does non include any clip for production – it is merely the day of the month from the initial hard currency spending to the day of the month of hard currency reception from the client. Companies do n’t randomly make up one’s mind an operating rhythm because it reflects how in world concern minutess advancement from start to complete. The operating rhythm is besides referred to as the cash-conversion rhythm, which is the length of clip that a company takes to change over its stock list purchase to gross revenues gross. A typical operating rhythm includes the yearss of stock list outstanding before gross revenues, the yearss of histories receivable outstanding before hard currency aggregation, and the yearss of histories collectible outstanding before hard currency payments. The operating rhythm is utile for gauging the sum of working capital that a company will necessitate in order to keep or turn its concern. A company with an highly short runing rhythm requires less hard currency, and so can still turn while selling at comparatively little borders. Conversely, a concern may hold fat borders and yet still require extra funding to turn at even a modest gait, if its operating rhythm is remarkably long.

Question 2 replies:

The followers are all factors that influence the continuance of the operating rhythm:

The drawn-out payment footings to the company by its providers since the company can detain paying out hard currency. longer payment footings shorten the operating rhythm.

The order fulfillment policy, since a higher false initial fulfillment rate increases the sum of stock list on manus, which increases the operating rhythm.

The recognition policy and related payment footings, since looser recognition equates to a longer interval before clients pay, which extends the operating rhythm.

Therefore, several direction determinations ( or negotiated issues with concern spouses ) can impact the operating rhythm of a concern.

McDonald ‘s is a great illustration of a franchise, many people have opened this ironss of fast nutrient all over their several states and to convey benefits to themselves and economic systems in which they ‘ve started this.Here are some of the factors of the celebrated fast nutrient concatenation we visit often, McDonald ‘s.

Common Operations Unit of measurements

Management is one of the most of import operational portion of a traveling concern. Management is responsible most of everything. The direction would manage the production responsibilities and do assorted and different strategic programs for the company to follow. The selling unit is in charge of the side of how to pull the clients towards the companies.As in illustration, the selling unit would be the people who publish materials about the company in newspapers and magazines. The administrative unit of the company is in charge of telling supplies, engaging employees, and pull offing communicating within ( and outside of ) the house. If you have a secretary to run your little office, this individual normally handles all of your administrative support activities.

Quality Management

Employees who work in operations have assorted sorts of duties, but the most common and the most of import occupation to manage is the quality direction. All of the operational units in the concern will hold to maintain an oculus on the quality direction. This is due to the fact that if choice direction is non handled decently with an oderly mode, there could be a really bad image upon the companies which in the terminal would be blamed on the operational units.


To hold a functional and well-run operations unit, the company must be structured and its foundation must be strong in order to run like a well-oiled machine. Communication to and from the assorted operational units of the concern is cardinal because they all work together to assist bring forth a net income for the company. This is particularly true for a really little company — one cog in the wheel can throng up operations. There is normally as written operations procedure manual distributed among all the employees to unclutter out all the confusions. This helps a batch because so the employee does n’t necessitate to upset the employers for any information but merely straight go through the manual.

When a franchisee invests in a host state, the graduated table of the investing is likely to be really big and do a batch of economic activity in whichever market it establishes itself in.

Bettering the balance of payments – Inward investing will normally assist a state ‘s balance of payments state of affairs. The investing itself will be a direct flow of capital into the state and the investing is besides likely to ensue in import permutation and export publicity. Export publicity comes due to the franchise utilizing their production installation as a footing for exporting, while import permutation means that merchandises antecedently imported may now be bought domestically.

Supplying employment – FDI will normally ensue in employment benefits for the host state as most employees will be locally recruited. These benefits may be comparatively greater given that authoritiess will normally seek to pull houses to countries where there is comparatively high unemployment or a good labor supply.

Beginning of revenue enhancement gross – Net incomes of franchises will be capable to local revenue enhancements in most instances, which will supply a valuable beginning of gross for the domestic authorities.

Technology transportation – Franchises will convey in the best engineering and all the sorts of methods that would be new to the host state. In contrary, by making this method, the host state would larn a batch from all these sorts of techniques which are really valuable to them.

National repute – The presence of any one of these franchises may convey out the best of the state and besides better the high position of the host state. This would be really good because all the other host states which would see the difference, would decidedly follow up with their ain franchises

Question 2 decision:

Given all the information, a owning and running a franchise is a hazardous concern as is with all concern but people do so with authorities encouragement and because they think that running a franchise will vouch a bigger or higher net income or income. This may non ever be the instance and it is frequently found that in the long tally running an original concern gives higher returns. Though all concern have their pros and cons, franchising and running a franchise has with it a batch to see and the proper determinations and actions must be taken in order for the concern to win and thrive.

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Advantages And Disadvantages Of Franchising Commerce. (2017, Jul 06). Retrieved from

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