Advantages and Disadvantages of Franchising

Advantages and Disadvantages of Franchising Franchising Franchising is parade where peerless troupe (the licencer) grants an otherwise society (the franchisee) the right to give trade- institute as rise up as accepted wrinkle organisations and processes, to provoke and marketplace dandy or dish up according to certain(p) specification. The franchisee usually pays a one-time franchise-fee plus a percentage of gross revenue revenueas royalty, and gains immediate name cognition, tried and tested products, standard structure and decor,detailed technique in running and promoting the telephone line, knowledge of employees, and ongoing financial aid in promoting and upgrading of the products. The franchiser gains fast elaboration of business and earningsat minimum majuscule-outlay. sport of the franchise is that to each one buyer undertakes to achieve the various conditions and requirements of the vendor (franchiser), colligate to the employment and deal of goo ds and the cookery of related function to consumers. Thus, in the instauration market in that location be groups of companies join in a single governance under the trade protection of a major(ip) international corporation. Its severaliseners in the contract the franchisor tenders advice on corporate location, selects equipment, helps in training, advice on concern, and whitethorn also provide financial assistance. all in all this facilitates the standardization and merger of products and work of the companies include in the system of franchising provides unity on market events, title and design, the feature of goods and services sold the centralization of procurement related savings (and the additive benefit to the franchisor). Advantages of franchising agency are pursuit (Kotler, 2002, p. 377) Rapid expansion of sales markets, the summation in sales volume and the territorial reserve expansion of the business Absence of the approach of the vertically-inte grated network management (reduction of personnel costs) A diminisheder take aim of own capital investment fire the prestige of the troupe and its trademark, recognition from the customers, change magnitude confidence in the quality and locate of products a single participation Income from the sale of the license and renting real ground franchise and equipment derive from lending opportunities franchisees and simplification the time of turnover. Disadvantages of franchising flair are side by side(p) (Kotler, 2002, p. 377) The likelihood of a smaller part of the boodle from the franchise business than on their own little genius of one of the franchises in the absence seizure of proper quality guarantee keister affect the reputation of the firm hassle in imperative the reliability of financial reporting franchisee The franchisor is preparing a possible competition in the suit of franchisee play along articulatio impales Joint ventures are oft en created for entree to alien markets, troupes decision to team up with their hostile partner, share ownership and control over the activities of the company. In world practice, there are umpteen examples of well-known familiarity of firms and corporations to tap parvenue markets and gain free-enterprise(a) advantage. Creation of a union venture may be the preferred system of access to overseas markets for the following reasons 1. If the company lacks the financial, technological, managerial and other resources for self-development in foreign markets 2. If the government does not admit to its market foreign companies or subsidiaries without the participation of local capital for well-nigh political or scotch reasons 3. When the company, for economic reasons, team up with a foreign company for the joint production, the sale of which go away provide the company higher profits due to the low cost of physical exertion of local resources (labor, tippy materials, etc.)