Question

A multinational firm is seeking to break grounds in the Ghanaian market. As a business consultant, explain why you would recommend the consideration of either franchising or licensing for the organisation.

(If possible, please answer in 1000 words. Thank you!)

Answer 1

Definition

Franchising is a marketing concept between a franchiser and franchisee where a franchisor licenses its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a Franchise Agreement.

Suitability

Indeed a franchising agreement would be a great arrangement to enter Ghanian market where the appropiate liscensing laws have to be followed and minimum capital requirement needs to be present. As the market segment of Ghana is be unknown, with the help of franchising agreement the risk and development costs can be shifted to franchisee who have the local market knowledge. The firms intellectual properties,ingredients,procedures,brand name,graphics etc will remain with the franchisor.

Examples

Some of the top examples of franchising firms which have a global presence are : Subway,McDonalds,Dunkin' Donuts, Pizza Hut

  Advantages :

• Minimum Management : Franchises offer the independence of small business ownership supported by the benefits of a big business network.Here the local business owners can be greatly benefited whereas the multinational corporation aiming its steps into that market segment needs to rely on small business persons.
• Growth : The level of growth which can be achieved in Ghana with limited capital can be exceptional. The problem is that opening a single unit takes time. For some entrepreneurs, franchising may be the only way to ensure that they capture a market leadership position before competitors encroach on their space.
• Increased Profitability : The staffing leverage and ease of supervision mentioned above allows franchise organizations to run in a highly profitable manner. Since franchisors can depend on their franchisees to undertake site selection, lease negotiation, local marketing, hiring, training, accounting, payroll, and other human resources functions.

• Risk : As stated earlier franchising can reduce the risk of the multinational corporation by dividing it to local Ghanian business units. The franchisee has the responsibilities to hire employees, managing finances, arrange the location of the office/premise and abiding by the seperate rules and regulations set in a different country.

• Innovation : As the company aims to expand it's operations in Ghana therefore the need of creativity and innovation arises can arise as per the new market location. Frachisee can easily undertake the innovation and creativity as per the local market requirements.