Question

 

in detail what the franchise system is, how it works, why is it successful?

Answer 1

A franchise (or franchise) is a method of selling products or services involving a franchisor creating the trademark or trade name of the company and a business system, and a franchisee paying a royalty and sometimes an initial fee for the right to do business under the name and system of the franchisor. Technically, the "franchise" is the arrangement binding between the two parties, although the term most generally applies to the specific company that the franchisee runs. The method of establishing and selling the network of marks and franchises is most generally referred to as franchising.

Apart from a well-known brand name, buying a franchise provides several other benefits that the entrepreneur who starts a company from scratch can't get. Maybe the most important thing is that you get a validated operating system and training on how to use it. New franchisees will usually prevent many of the errors start-up entrepreneurs make, as the franchisor has already mastered daily operations through trial and error.

Before opening a new store, reputable franchisors perform market research so you'll be more comfortable there's a need for the product or service. Failure to do sufficient market research is usually one of the biggest errors individual entrepreneurs make; it's done for you as a franchisor. The franchisor also provides you with a good view of the competition and how you will stand out from it.

Franchisees enjoy the advantages of numerical power. In purchasing products, equipment and services, such as ads, as well as in negotiating locations and lease terms, you can benefit from economies of scale. By contrast, independent operators have to negotiate on their own, with less favorable terms typically arriving. Some suppliers do not manage new businesses or refuse your company because your account is not big enough.

Efficient franchisers are averse to the risk. They are willing to take some risk but want the risk to be as small as possible and controlled. Any start-up entails some chance of failure, but a successful franchise with proven success story will mitigate this chance. Successful franchisors are doing their homework, so they know what they get into.