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
1. Franchisees gain numerous advantage when they purchase a franchise. First, while a franchisee may be opening a new store, it is part of an already established business and system. This means a franchisee has access to turnkey operations, allowing an increased speed to establishing and growing the business. Franchisees also get support for management and training activities, as well as financial assistance. Going hand in hand with this, a franchise already has an established brand name, quality of goods and service which have been standardized across the franchisor’s larger company, and national advertising programs from franchisors. Franchises also have large-volume, centralized buying power. A franchise has proven products, and
The franchiser can attain rapid growth for the chain by sign- ing up many franchisees in many different locations.
The first choice of business is the franchise. In a franchise, legal binding agreement is entered into between two firms, the franchisor (the product or service owner) and the franchisee (the firm to market the product or service in a particular location). The franchisee pays a certain sum of money for the right to market this product” (Rubin, 1978, p.224). The franchising is more prevalent in the restaurant industry (Hoffman & Preble, 2003). The two distinct features of this business type include; first, in order to notable service components should
A good franchise offer training and support as owner will not know how to run Jiffy Lube or Subway without guidance. Franchisor have advantage from buying power and efficiency due to large scale of franchise so they can negotiate lower prices for the products and services needed to run business. The startup cost can have a wide range depending on the franchise, therefore most franchise have financial loan program (Geoff, 2013).
The lecturer claims that a franchise is not a good option to start a business. This contradicts the reading passage’s assertion that buying a franchise has lots of benefits for people to start their own business.
In North America alone, new franchise opportunities are popping up daily, giving these interested individuals a variety of tools designed to grow both their businesses and the studies of their customers. Just like any other venture, though, there are both advantages and disadvantages to purchasing a franchise of a larger parent company.
It has its advantages and disadvantages to franchise the business. It is a careful decision to make for anyone to invest a lot of money into a franchise and everyone should be comparing pros and cons.
Franchisors are increasingly having to be more and more selective in the adoption of franchisees with factors such as economic climate and the potential difficulty with growth playing key factors in the decision making process. It is not simply an ability to grow which creates a successful Franchise and nor is it the desire of any franchisor to adopt every potential franchisee. Franchisors are becoming more and more scrutinising as the global economy declines. There is a general understanding within any franchised
To begin with, the concept of “franchising” originally appeared in Britain in the 10th century and as a term described a variety of benefits, which were provided to the citizens in the context of the electoral process. However, the revival of franchising as a modern business institution is marked by the year 1840, the year of the appearance of the first worldwide franchise network (the system of “tied pubs”) in the UK, which was used by the brewers in order to maintain the necessary volume of sales. In fact, the “tied pubs system” operated in accordance with the following principle: in exchange for a loan or rental property a brewer was provided with an inn, that is, with the possibility to sell beer and alcoholic beverages (Lashley & Rowson, 2002). At this point, it should be noted that the abovementioned system still exists these days, which illustrates the effectiveness of such type of business.
Franchising is a type of business or a relationship (Chatfield et al., 2009), where a party (franchisee) acquires the right to use a company's (franchisor) property knowledge processes and trademarks (Investopedia, n.d.). In other words, by paying a start-up and annual licensing fees, the franchisee can use the franchisor's name, distribution channels, software, operations manual, and others, to sell a product or offer a service (Collins & Perret, 2015). Moreover, franchising has positive and negative factors for both sides. On the franchisee's side, the positive factors are: full operational control, franchisor's support, and higher profits after fees. The negative components are: bound to franchisor's global initiatives and no control of brand reputation. On the franchisor's side, the advantages are: company's growth, no operating risk, and more business fees with minimal effort. On the other hand, the limitations are: lack of operational quality, satisfaction of guests and employees, and company's image (Collins & Perret, 2015). Today, franchises account for a big part of the world's businesses, such as stores and restaurants. In the hotel industry we can see this type of business happening with Hampton by Hilton and Day's Inn (Investopedia, n.d.).
Franchising is a broad and a great business tool to deliver goods and services, and to flesh out a line of work. It can have a great effect on investment, but it is also one of the most likely to be misunderstood aspects of a specific project.
An advantage of an entrepreneur buying a franchise is that there will be a higher rate of success than when owning a start-up business (Queensland Government, 2016, Online). This would be beneficial for the entrepreneur buying the franchise because it will help to generate more profit and
Not having to answer to a corporate boss is the dream of many and the flexibility that owning a business franchise creates provides this option. Success is not reached by simply creating a business, however. The level of success is measured by the size and efficiency of the business. Business growth is the driving force of the economy. The additional jobs and revenues created when a business expands allow the economy to grow at exponential rates. One of the fastest and most popular ways to increase the size of a business is to turn it into a franchise, which can then be purchased by individuals. Franchising provides opportunities that are beneficial to both the parent company and the purchaser. The company that owns the business can expand
In simplistic terms, franchising is where a successful business format is replicated. This will involve the setting down into an operations manual all the systems and procedures that the business owner has found gives them the best chance of success. Anyone joining the franchise will be expected to operate the business exactly as set out in the manual. The purchase of a franchise will
A franchise contract is a form of organization involving two independent firms with the aim of selling goods and services in a specific area ( “How to influence franchise contracts: the Spanish case”Alicia Garci’a- Herrera, Rafael Llorca-Vivero, 2009). Another resource- Business dictionary describes franchise agreement as a contract in which well-established business provide its brand, operational model and required support to another party in order to set up and run similar business. This costs a fee and/or a part of generated income. This distribution technique increases competition between companies producing similar products or services by high efficiency and transaction costs reduction. By this distribution technique the franchisor gains access to more new markets, can raise profits, decrease costs and share risks while still controlling the new franchisee. This collaboration is very important for small and medium businesses. In 2009, a third of retailing networks in US were by franchise contract, in EU impact is smaller but is also growing (Garci’a- Herrera, Llorca-Vivero, 2009).