Advantages of Business Franchising
Franchising is a business option that allows for the use of a successful business model provided by a franchiser to a franchisee. Each of the parties involved in a franchise agreement has responsibilities to perform and interests to protect. In a sense, the success of the franchiser would depend on the franchisee’s performance although it is a fact that there must already be an existing successful model.
Franchisees are naturally attracted to a successful business operation. The appeal is greater to some when compared with putting up one’s business idea from scratch because everything has been prepared for convenient business operation. Profit potential is also bigger since the franchisee has a direct stake on the business.
Franchised businesses employ a considerable number of people in different parts of the world regardless of the location of the mother company. Thus, we see familiar names such as McDonald’s, Hampton Inn and Shell Gasoline Stations almost anywhere we go. Franchise names represent a certain standard usually associated with excellence in a particular industry.
The main advantage of franchising to franchisers is the possibility for expansion with less investment since the franchisees will be required to put up the additional capital to open new locations. The rate of return is also higher for franchisers since the financial risk is usually shouldered by franchisees. The increased visibility also adds value to the franchise.
Franchisees for their part can maximize their earning potentials by knowing how to negotiate the license. Fees must be fully disclosed and a business plan must be in place. Franchisors must assure franchisees of protection in their territory