Advantages of owning a franchise - Term Paper Example

? Business: The Advantages of Owning a Franchise ID: Dr. English The Advantages of Owning a Franchise Over the recent years, franchising has become a beneficial venture and has attracted many entrepreneurs. Franchise refers to the license describing the relationship between two individuals; the franchisor and franchisee (Inma, 2005). In this case, the license includes support, control, trademarks and fees. Franchising allows the goodwill, reputation, expertise, and technical knowledge of the franchise to be used together with the investment of the franchisee so as to produce and sell goods and services. In other words, a franchise is a form of business that involves one organization using another organization’s successful business model. Owing to its effectiveness in combining the skills, investments, expertise, and knowledge of the franchisor and the franchisee, franchising has become more and more popular among business people over the last few years. There are several advantages of owning a franchise which are having: continual support, financial assistance, and proven profitability. Continual Support One main advantage of franchising is that the franchisee is subject to continued support from the franchisor. Owning a franchise helps one to get various forms of support such as pre-opening training in which one is trained about the technologies, operations, marketing and financial aspects of a business. During pre-opening training, the franchisee is trained on how a particular business operates and how to handle matters that the business may face (Kong 2011). In other words the franchisee enjoys ongoing support as the situation dictates, the franchisor acting as a mentor to the franchisee. In this respect, the franchisee and their employees may receive continuous training as and when the need arises. Given that the franchisor benefits from the success of the franchisee, they are bound to go an extra step to ensure that the franchisee succeeds in business. This being the case, the franchisor will always be ready to offer continuous technical support to the franchisee which is good for the wellbeing of the business and both of the parties. The franchisee can also be offered financial support for advertising and promotion by the franchisor. It is important for an entrepreneur to understand the different aspects of the business they intend to engage in. In many cases, businesses wind up simply because the entrepreneur lacks the requisite skills and knowledge, technologies, finances, or support. While these are some of the challenges that people who engage in other forms of businesses face, a person who starts a franchise has higher chance of succeeding. With this kind of support, the franchisee is able to start and grow his/her venture very fast without many problems associated with lack of knowledge and finances. Financial Assistance The second advantage of franchising is that unlike it happens with other forms of businesses, a franchisee can easily receive financial support to start and run a franchise. It is well known that many qualified franchisees do not have enough capital to run an outlet. The franchisor may finance the franchisee either directly or through third parties (Beshel 2001). With respect to third party financing, the franchisee is financed by a third party but the franchisor acts as guarantor. If the cost of general advertizing is high, the franchisor may also offer financial assistance to the franchisee so as to help in increasing sales. This is aimed at generating more income to recover the advertizing costs. In other cases, the franchisor may opt to temporarily exempt the franchisee from paying the franchising fees or remitting a share of the profit so that the franchise may achieve stability. With the franchisor offering financial support, the franchisee is able to set up an outlet even if he has limited capital. Proven Profitability Franchises are generally associated with high success levels and, therefore, high profitability. Operating a sole proprietorship, partnership, or company does not guarantee success as much as franchising does (Barkoff & Selden 2004). To put it differently, owning a franchise gives the franchisee an added advantage as their business gets to enjoy brand recognition. MacDonald’s and Tim Hortons are two brands that are well known in the international market. The restaurants are associated with several outlets managed by franchisees. Tim Hortons franchises make more than 16% profit after all expenses have been deducted. For its proven profitability, many believe that owning a franchise that is branded Tim Hortons is like owning a money minting machine (Hunter 2012). What this shows is that owning a franchise gives one the the potential to make huge profits with a high ate of success. Tim Hortons made its name after ensuring that they offer fresh, top quality, and high value products and exemplary service (Hunter 2012). The company is so well recognized as a brand that customers are often drawn to its branches or franchises. The MacDonald brand is recognized for its high quality products (McDonald’s Corporation 2011). The McDonalds has a wide variety of products to meet the diverse needs of customers across different market segments. The Macdonald brand is so strong in the United States of America, Canada, and Britain, that owning a franchise branded McDonalds is guaranteed to bring an investor huge profits. Although the two franchises are very expensive to buy, they have a good command of the market due to their brand recognition. Tim Hortons made its name after ensuring that they offer fresh, top quality, and high value products and exemplary service (Hunter 2012). Owning a franchise that has a brand name saves the franchisee a lot of headache as they do not have to spend so much energy and resources in capturing a new market. Since most of the products have gained recognition, buying a franchise is a sure way of achieving success in business. Brand recognition helps the franchise owners to use very little money to carry out advertisement and promotions (Kong 2011). This is because the immediate market is already aware of the high quality product under a brand name. The established brand image attracts very high returns for the outlets which is advantageous to the franchisee. Conclusion To sum up, franchising basically involves an organization applying a business model developed by another organization that has proven to be successful. Several businesses today engage in franchising. The business model has several advantages for the franchisee, some of which includes continued support (financial and technical), guaranteed financial assistance, and proven profitability as a consequence of brand recognition. Given the stake of the franchisor in the business, they are bound to offer a lot of support and assistance to the franchisee before and after the establishment of the venture. Furthermore, the franchisee gets to receive a boost from the franchisor in the event that they do not have enough capital to establish an outlet. Yet another major advantage of owning a franchise is that the business enjoys the brand recognition that the parent company has established. In this respect, the franchisee does not have to spend so much in marketing and advertising as they enter the market. Given this advantage, and the support that franchises enjoy from franchisors their success levels are known to be quite high. While other forms of businesses face a myriad of challenges without the benefit of expert support, franchises have a sure opportunity of overcoming the challenges that come their way as they rely on the support of more experienced individuals and networks. References Barkoff, R. & Selden, A. (eds.) (2004). Fundamentals of franchising. Chicago: American Bar Association. Forum Committee on Franchising. ISBN 1590314093 Beshel, B. (2001). An Introduction To Franchising. The IFA Educational Foundation. Retrieved December 13, 2013, from http://www.franchise.org/uploadedFiles/Franchise_Industry/Resources/Education_Foundation/Intro%20to%20Franchising%20Student%20Guide.pdf Hunter, D. (2012). Double Double: How Tim Hortons became a Canadian way of life, one cup at a time. Toronto, Ontario, Canada: HarperCollins. Inma C. (2005). Purposeful Franchising: Re-thinking of the Franchising Rationale. Singapore Management Review27.1 (2005): 27-48. Retrieved from http://0-search.proquest.com.mylibrary.qu.edu.qa/abicomplete/docview/226850145/14257DCF681242505BB/2?accountid=13370 Kong, A. (2011). The Benefits of Franchising. Retrieved December 13, 2013, from http://www.mongolchamber.mn/attachments/article/414/benefits%20of%20franchise%20-%20Albert%20Kong.pdf McDonald’s Corporation (2011). McDonald’s Franchising. Retrieved December 13, 2013, from http://training-vanzari.ro/wp-content/uploads/2012/04/McDonaldsFranchiseBrochure.pdf Read More