Franchising

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In today’s uncertainty economic climate, UK’s economy’s growth in long period has stopped and has been in recession since July 2008. This was caused by key global problems such as rising in commodity prices, house price bubbles, volatility in financial markets and of course the credit crunch. These give a great impact on the business sector. Reduction orders or demands have led to closure of many companies across all sectors. Small businesses are struggling to access the capital needed to stay open, pay debts, maintain payroll and expand operations. The problem is worse for those looking to get into business for themselves for the first time. The Federation of Small Business indicated that about 280 small companies are going out of…show more content…
For businesses that experience finance, human resource and property restraints to achieving expansion, franchising is a way to expand businesses with relatively cheap and risk-free as franchisee finance the majority of the cost such as the premises, vehicles or whatever necessary to grow the business. In other words franchising is a way to secure capital for franchisor. By allowing other ambitious business people to create another branch to a small business, its enable the owner to keep tight hold on overhead, marketing costs and salary, as Harvard Business School assistant professor Dennis Campbell notes, companies which use franchising do not need to invest time and energy in investing highly-skilled managers, allowing significant cost savings not least in terms of wages. This means the franchisor can use its time and capital for other purposes. Robert E. Bennet indicated that economies of scale in purchasing could be achieved much faster by a small company expanding through the franchise route. The franchisees also will have to run their businesses themselves. This will reduce the management demands placed on the franchisor. The best franchisees will be highly motivated and have local expertise. This is the one of the best elements of the franchise system where the franchisees will have to personally spend their money, time and

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