Question

What are the advantages and disadvantages of becoming a franchisee? Should a person considering going into business the first time consider a franchise? Discuss. (10 marks, maximum 300 words)

Answer 1

Advantages of franchising.

1. Maximum income
2. Market dominance
3. Securing locations
4. Rapid expansion
5. Efficiency
6. Raise capital
7. Achieve optimum size
8. Great buying power
9. Development of advertising materials

Here are the disadvantages:

1. Theft of Intellectual Property, Infringement of Trademark and Copy Cat Business boards with slight variations in names.
2. Under reporting of Profits as many businesses still operate on cash.
3. Franchises often do things their own ways.
4. Franchises create cartels that start threatening the franchisor.
5. Cultural Diversity and State / Region Wise Disconnect as most franchisors are unable to get a country footprint in place properly.
6. Taxation Issues even after Implementation of GST, customers not willing to pay tax as non-franchised competitors are able to offer that facility.
7. Finally, since there is no single franchise law governing franchising in India, scrupulous operators have been appointing franchises and cheating investors and entrepreneurs without creating the adequate support systems to franchise.