ADVANTAGES OF FRANCHISING

For franchisors

Expansion

Franchising is one of the only means available to access investment capital without the need to give up control in the process. After their brand and formula are carefully designed and properly executed, franchisors are able to expand rapidly across countries and continents using the capital and resources of their franchisees, and can earn profits commensurate with their contribution to those societies.

Additionally, the franchisor may choose to leverage the franchisee to build a distribution network.

Legal considerations

The franchisor is relieved of many of the mundane duties necessary to start a new outlet, such as obtaining the necessary licences and permits. In some jurisdictions, certain permits (especially liquor licenses) are more easily obtained by locally based, owner-operator type applicants while companies based outside the jurisdiction (and especially if they originate in another country) find it difficult if not impossible to get such licences issued to them directly. For this reason, hotel and restaraunt chains that sell liquor often have no viable option but to franchise if they wish to expand to another state or province.

Operational considerations

Franchisees are said to have a greater incentive than direct employees to operate their businesses successfully because they have a direct stake in the operation. The need of franchisors to closely scrutinize the day to day operations of franchisees (compared to directly-owned outlets) is greatly reduced.

For franchisees

Quick start

As practiced in retailing, franchising offers franchisees the advantage of starting up a new business quickly based on a proven trademark and formula of doing business, as opposed to having to build a new business and brand from scratch (often in the face of aggressive competition from franchise operators). A well run franchise would offer a turnkey business: from site selection to lease negotiation, training, mentoring and ongoing support as well as statutory requirements and troubleshooting

Expansion

With the help of the expertise provided by the franchisers the franchisees are able to take their franchise business to that level which they wouldn't have had been able to without the expert guidance of their franchisors.

Training

Franchisors often offer franchisees significant training, which is not available for free to individuals starting their own business. Although training is not free for franchisees, it is both supported through the traditional franchise fee that the franchisor collects and tailored to the business that is being started.

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