Franchising has certainly become a key component of the U.S. economy. What are the major advantages and disadvantages of franchising.
There are several advantages when it comes to franchising. Some advantages include building relationships with suppliers that have already been established. Another benefit is that financing the business would usually be easier. Another advantage would be having the support of the franchisor to assist in any trainings or business procedures that need to be strictly followed. There is also a number of disadvantages that comes with franchising. The cost tendency is usually costly with the initial cost and the service fees that are applied which aren’t good. Another disadvantage would be the restrictions that are imposed. Certain changes may not be allowed in which can hurt the market value of the business. Another disadvantage is that a percentage of the profits are usually shared with the franchisor as well.
Without any doubt and as learned from the information in the textbook, there do seem to be a number of advantages but also some drawbacks that could be seen with the franchising model of the business. What comes to be seen here is that by franchising, the franchisor such as say the parent company of Mcdonalds would be guaranteed that steady stream of income on an annual basis and this often comes in the form of the franchising fee and the royalty fees that get to be collected. In addition to that, there is also a bigger brand name expansion and brand promotion with the franchising option as more and more of the chain’s franchises get to be opened. But i feel that the drawback is that maybe at times, the franchiser might not have that comprehensive or complete control over the business in different parts of the world or how well it is meeting the underlying standards of the franchisor.