GDB
MGT211:
Question:
How franchising could be disadvantageous for a franchisee? On which grounds it is beneficial for the franchisee?
Solution:
How franchising could be disadvantageous for a franchisee? How franchising could be beneficial for a franchisee?
The franchisor can exert a degree of control over the majority of the franchise business and decisions made by the franchisee.
The franchise agreement usually includes restrictions on how you can run the business.
The franchisor might go out of business.
• High initial investment
• Limited creativity
• Lack of privacy
• Business of location
• Hours of operation
• Decor
• Products 1. Business assistance:
Franchiser provides guidance to franchisee in all affairs of the business. This assistance can be essential to running a successful business and makes it much easier than starting a business from scratch.
• Capital Motivated and Effective Management
• Fewer Employees
• Speed of Growth
• Limited Risks and Liability
2. Initial cost
Even if you opt for a low cost franchises you’ll likely still have to front a few thousand dollars. While this can be seen as a disadvantage of franchises, it’s important to weigh the opportunity against the initial investment and find the right balance for your business.
Initial investment of the franchise fee buys a lot of the benefits for the franchisee, it can also be costly-especially if you’re joining a very well –know and profitable franchisee. 2. Lower failure rate:
Franchises have a lower failure rate then solo business. When a franchisee buys into a franchise, they’re joining a successful brand, as well as a network that will offer them support and advice, making it less likely they’ll go out of business.
