• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Explain the nature of franchising. Discuss the advantages and disadvantages for both the franchisor and the franchisee.

Extracts from this document...

Introduction

FRANCHISING Question: Explain the nature of franchising. Discuss the advantages and disadvantages for both the franchisor and the franchisee. Franchising is 'a continuing relationship in which the franchisor (the owner of a company) provides a licensed privilege to the franchisee (the buyer) to do business and offers assistance in organising, training, merchandising, marketing, and managing in return for a consideration. It is a form of business by which the franchisor of a product, service, or method obtains distribution through affiliated dealers (franchisees).' (http://www.business.gov) A franchise is essentially a replica of an existing business. When you purchase a franchise, you buy the rights to use the parent company's name and to sell its product or service in exchange for an up-front franchise fee and ongoing royalties, which are usually between 3 and 6 percent of sales. While buying a franchise does have certain disadvantages, the right franchise can provide a certain amount of security that is often missing from new ventures. The franchisor and franchisee's aim is to create a strategic alliance with a common goal to dominate a market. Although there are many advantages for both the franchisor and franchisee, there are also many disadvantages and I will be analysing these throughout the assignment. ...read more.

Middle

Support and assistance is also provided by the franchisor, giving the franchisee quick access to help solve any problems that may arise. This gives the franchisee a sense of not being alone. This can be hugely beneficial, as entrepreneurship can often be a lonely and difficult road and success can be particularly isolating. This links in with Elton Mayo's ideas of being part of a time. As franchises are not in effect, individual businesses, they have team like qualities and therefore employees feel more motivated. Disadvantages for the franchisor include the fact that the establishment of a franchised business will demand a significant amount of investment. There will be high set up and development costs to begin with. Once the franchised business has been set up the franchisor will need to provide the franchisee with much support, particularly in the early stages of the new franchise, as sales figures will most probably be low. In the early stages of franchising a business there will most likely be initial losses, but 'as soon as a reasonable number of franchises are up and running, and early franchisees begin to mature, the franchisor's income flow will become increasingly attractive.' ...read more.

Conclusion

The franchising industry is worth �9.65 billion, that is an increase of 2% on 2003. The franchising industry employs around 330,000 people in the UK, which is an increase of 1% on last year. For well-known brands such as McDonald's, Pizza Hut and the Body Shop, franchising has brought considerable rewards for both the franchisor and the franchisee. Franchising can be particularly beneficial over setting up your own business as it reduces the risk involved and generally provides the franchisee with a steady flow of customers, as opposed to trying to form your own customer base. With franchising being proven to be the safest way of starting up your own business, its is no wonder that nine out of ten franchisees are reporting a profit. Franchising enables you to see your potential business in operation before you invest a penny. On the other hand, it is probably not for someone who does not like to be told what to do and likes to do things their own way. Although there are disadvantages for both the franchisor and franchisee, I would personally say that the advantages outweigh the disadvantages and that franchising seems to be a particularly wise option and is expected to increase significantly within the next 12 months. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level ICT in Business section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level ICT in Business essays

  1. I have selected a nursery because there is high demand in the UK as ...

    a time when local authority provision has been decreasing, though it has started to grow again. All this shows that there is a high demand for nurseries One of the main reasons why demand is so high is that more women then ever before are going to work, and therefore

  2. Advantages and Disadvantages of e-commerce in terms of easyjet

    Factors shaping on-line business There are many factors that are influencing the shape and success of e-business. Some of the main ones are described below. Popularity of Internet cafes/salons Internet cafes are one of the reasons why Web access has boomed in the UK over the past 10 years.

  1. Articles on franchise

    However, the market is not very tolerant for these inexperienced entrepreneur to learn how to operate a new business. If you can't survive in the market place you will lose your money, credit, home, reputation and in some cases your family. Thousand of U.S. business men experience this every year.

  2. In this piece of work I will be looking at the Swedish born business ...

    quality and durability, at prices so low that the majority of people can afford to buy them (IKEA 1994). The company targets the customer who is looking for value and is willing to do a little bit of work serving themselves, transporting the items home and assembling the furniture for a better price.

  1. Effective blending of Entrepreneurship and Professionalism.

    It requires systematic analysis and hard rigorous work today and that means by people in today's business and operating within it. The specific job of Entrepreneurship in business enterprise is to make today's business capable of making the future, of making itself into a different business.

  2. mcdonalds. Based on what Ive researched I think it was a good idea ...

    External growth enables fast expansion of a business but there are a number of problems. Where two companies come together, the cultures may be quite different and difficult to match up. In addition there may be disagreements between managers who are used to working with different practices and methods.

  1. E2: describe and explain the objectives of the business

    All new products have to satisfied quality and hopefully improve technology i.e. tyre performance. * Manufacture Division They are trying to improve the techniques of manufacturing to reduce costs and increase quality. Hopefully creating more and better sales. They work closely with the sales department, making sure sufficient tyres have been made ready to meet orders taken.

  2. "Being first does not necessarily mean being the biggest. Discuss the issues of growing ...

    However, regardless of all its effort, care and concern to its customers, Wimpy remains only third in the fast food franchise chain in the UK. In ensuring that their franchisees obtain the utmost optimum assistance and supervision available to them from the franchise, Wimpy have constructed three diverse kinds of

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work