Thougt it Was Safer Than Starting His Own Business - Case Study Example

? Thought It Was Safer Than Starting His Own Business Thought It Was Safer Than Starting His Own Business Assess Fred’s capability and capacity to be a franchisee in general and for this specific company. According to Franchise Direct (2012), franchising is “a form of marketing and distribution in which the franchisor grants to an individual or company (the franchisee) the right to run a business selling a product or providing a service under the franchisor's business format and identified by the franchisor's trade mark or brand” (Franchise Direct, 2012, par. 1). In Fred’s situation, being previously employed in an automobile parts industry for nearly 30 years, he could be regarded as fully capable and qualified to be a car repair franchisee. First, the business belongs to practically the same industry where Fred was employed for a considerable length of time. Secondly, since he rose through the ranks, having retired as a senior execute from the previous firm makes Fred highly skilled in terms of possessing the knowledge, abilities and skills needed to operate a franchise within the same industry. However, there is disparity in the specific service offered by the previous organization he was employed with (automotive parts) and that of his franchise (car repair). Therefore, in terms of having direct and previous experience on operating a car repair business, Fred seemed to start as a neophyte in this kind of business endeavor. 2. Evaluate Fred’s misconceptions about being a franchisee. Speculate how common these misconceptions may be for all new franchisees. As indicated in the case facts, Fred perceived that there were apparent misconceptions in terms of “being his own boss and running his own company” (The Franchise Handbook, 2000, par. 5). According to Gappa (2012), “there are many misconceptions about franchising, but probably the most widely held is that you as a franchisee are "buying a franchise." In reality you are investing your assets in a system to utilize the brand name, operating system and ongoing support. You and everyone in the system are licensed to use the brand name and operating system” (Gappa, 2012, par. 5). This statement therefore corroborates the validity of Fred’s assertion that one of the misconceptions of franchising is thinking that when one enters into a franchising agreement, the franchisee would be his own boss and would run his own company. As a franchise, all the terms of the franchisor would be followed and adhered to. Likewise, it was emphasized that “as a franchisee you own the assets of your company, which you have chosen to invest in someone else's brand and operating system and ongoing support. You own the assets of your company, but you are licensed to operate someone else's business system” (Gappa, 2012, par. 11). It could be therefore common for new franchisees to assume that by entering into a franchise agreement, the new venture would give one the opportunity to own a business and be one’s own boss – since one would invest considerable amount of funds that could be parallel with investing on establishing a practically new business venture. The only difference in franchising is that one opted to invest in a previously established business with previously established historical performance to gauge customer’s response to the product (or service) and therefore provide a plus factor in terms of image, core competence and competitive advantage. 3. Suggest what Fred could have done differently to be better informed and advise Fred on action he can or should take now knowing his situation. For new entrepreneurs and business practitioners who are thinking of starting a new business venture or opting to enter into a franchising agreement, to be better informed, there must have been a more comprehensive and extensive research undertaken on the alternative courses of action: to establish a new business venture or to enter into a franchising agreement. There are advantages and disadvantages to both options. For seriously considering the option of going through a franchising agreement, the advantages that should have been noted and made clear to potential franchisees, are as follows: “(1) ownership mentality; (2) building the value of the brand; (3) franchise systems generally have a superior image over other distribution approaches; (4) possibility for franchisee participation and support; (5) system-wide marketing support paid for by franchisees; (6) improved control over operations at the retail level; and (7) avoidance of legal exposure” (Holmes, 2003, pp. 4-8). On the contrary, the disadvantages that must have been presented at the onset for those reflecting on going into franchising are as follows: “(1) higher legal expense; (2) technical legal constraints in terms of: (a) franchise award process and (b) regulation of the relationship; (3) franchise marketing constraints; (4) control issues: (5) business relationship issues; (6) need to deliver perception (and reality) of continued value; (7) potential for loss of freedom; (8) finding qualified franchisees; and (9) unmanaged growth” (Holmes, 2003, pp. 2-4). Therefore, having laid out the advantages and disadvantages of franchising, Fred must be made to decide on whether to continue with the franchise agreement he has forged with the car repair franchising business or to end the agreement and either start a new one using his own name and expertise gained or to retire. The decision would actually depend on his priorities, personal plans for the future, and based on what the franchising agreement has stipulated. Since initially, Fred stipulated that his personal and professional goal was to “pursue semi-retirement and stay the rest of his years there running a business” (Franchise Direct, 2012, par. 1); he should be reminded that through franchising, he already is achieving his goals. He must also be reminded that after five years of franchising, his expertise and capabilities have been improved as evident from the number of branches that was viably opened through the financial success of this venture. This means that he has been productive and financially successful in running the business. It would be more stressful for Fred to establish a new business at this point in time given the higher risks of starting up a practically new venture. He could also opt to end the franchise agreement and go to the same car repair business using his own business name (provided there there are not restrictions stipulated from his previous franchising deal). After 30 years in the previous employment and another 5 years of being a franchisee, it could be deduced that he could be near his retirement age. As such, he could opt to continue franchising for another 5 years (if he still wants) or to retire already. Since he indicated that he was not happy anymore, the best decision he could make is to end the franchising agreement and go full time in retirement. The decision would really depend on how he intends to spend the rest of his retirement and his life. References Franchise Direct. (2012). Franchise and Franchising Defined. Retrieved July 20, 2012, from http://www.franchisedirect.com/information/introductiontofranchising/definitionoffranchising/7/80/ Gappa, B. (2012). What is franchising? Retrieved July 20, 2012, from franchising.com: http://www.franchising.com/articles/what_is_franchising.html Holmes, D. (2003). The Advantages and Disadvantages of Franchising. Retrieved July 20, 2012, from holmeslofstrom.com: http://www.holmeslofstrom.com/z_pdf/articles/franchisors/Fran%20Advantages.pdf The Franchise Handbook. (2000). Milwaukee. Read More