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Franchising

Franchising allows a business to expand by entering into relationships with independent business owners through contractual franchise agreements.  The two parties involved are the franchising company, called the franchisor, and the independent business owner, called the franchisee. The franchisor grants the use of trademarks, trade names, and other intellectural property to tfranchisees.

The advantages of franchising include:

• Someone else (i.e., the franchisee) provides the capital for each new location opened.
• Franchisees have an economic as well as a personal interest in ensuring that the new location succeeds.
• Franchisees will typically be better trained to run the franchise than will company employees.
• Your company can grow more quickly by opening franchises than by opening company-owned outlets.
• Franchising allows you to grow without sacrificing control over business operations.
• You, as the franchisor, can continually change the business format to meet changing customer requirements.

The disadvantages of franchising include:

• You as the franchisor forego profits at the franchisee level; profits from the franchised business remain mostly with the franchisee.
• You will have to listen to the opinions of your franchisees more than you would normally do with employees.
• You must ensure that your franchisees are fully and continually trained on how to operate their business and this requires resources and time.
• You start a new and different business when you franchise. You now are in the franchising business which is all about recruiting, training and supporting franchisees. You thus must be able and capable of learning the new business .

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