Question

⦁   CASE STUDY

The Allure of Franchising

Neil Erlich knew that he wanted to be an entrepreneur when he helped start a contracting business when he was just 14 years old. During his junior year at Sonoma State University, Erlich, with help from his father, a corporate executive, began investigating franchise options that would suit his interests and skills. They honed in on the automotive service industry and reviewed the regulations of several franchises, including Total, Jiffy Lube, and Midas, before settling on Express Oil Change. Erlich was particularly impressed with the support that Express Oil Change offered its franchisees. When Erlich graduated with a business degree, his father put up $375,000 to help him purchase and set up the $1.5 million franchise operation. Erlich, who is the youngest franchisee in the Express Oil Change system, sees the franchisor’s support as one of the greatest benefits of choosing to open a franchise rather than an independent business of his own.” The franchisor is there for you," he says. "It’s very comforting. "

Like Erlich, a growing number of college graduates and twenty-something adults who are disenchanted w*+
th the prospects of a dull job in the corporate grind are looking to franchising as a promising career choice. Indeed, franchising is attracting people of all ages and backgrounds, from corporate dropouts and military veterans to retired Baby Boomers and corporate castoffs.
” People say, ’I put 20 years into a company, and because they ran into some tough times, they let me go,’” explains Ray Titus, head of the United Franchise Group.” They think, ’Do I want to put myself into a position where I may get laid off again?’ Instead, they take control of their future by running their own businesses." For many of them, franchising is the perfect fit.

Retirees who are looking for second careers also are turning to franchising as well. "They’ve got school-of-hard-knocks experience and business skills that they can apply on day one at a franchise," says Michael Shay of the International Franchise Association. Judy Divita, a retired corporate human resources manager, and her husband Charlie, a retired college professor and consultant, decided to embark on second careers as franchisees rather than stop working. After researching franchise opportunities, they opened a Subway franchise in Columbia, South Carolina, not far from where Charlie had taught at the University of South Carolina. Over the next nine years, the Divitas opened five more sandwich shops in Columbia, including one on the university campus. In addition to their built-in market of college students, they target the players on the athletic teams that come to campus to participate in more than 400 sporting events ranging from baseball and football to basketball and volleyball each year. The Divitas have won the MVP Award Winner for Innovation from Multi-Unit Franchisee magazine. Their nine outlets generate $4.5 million in annual sales, and the couple’s goal is to have 13 Subway locations within 10 years.” The franchise gives you the basic things to put you in business pretty quickly," says Charlie.” You have to take it beyond that and be creative to come up with novel ways of doing things that are particular to your company and your community.”

Franchising can be the ideal path to owning a business for people in almost any phase of professional life, whether they are retirees looking for a new direction and extra income or recent college graduates who are ready to embark on exciting careers. "Boosted by a brand name, training, advertising, and an established business plan, a franchise can ease the struggle and the risk of opening a business and still let you call some shots,” says one business writer.

⦁   QUESTIONS:
Answer the below questions based on the text above, the course material, your own experience and information search on the internet and in academic sources from the AOU e-library. (i.e. companies’ webpages, AOU e-library databases…)

⦁   These examples show people at different stages of their professional lives choosing to become business owners with the help of a franchise. What conclusions can you draw from their stories about the benefits and appeal of franchising? (300 words – 40- marks)

⦁   What are the disadvantages of investing in a franchise? (200 words – 30 marks)

⦁   Suppose that one of your friends who is about to graduate is considering purchasing a franchise. What advice would you offer him or her before signing the franchise contract? (200 words – 30 marks)

Answer 1

****Please please please LIKE THIS ANSWER, so that I can get a small benefit, Please****

1. These examples show people at different stages of their professional lives choosing to become business owners with the help of a franchise. What conclusions can you draw from their stories about the benefits and appeal of franchising?

it is important to understand what Franchising is about. Franchising which can also be referred as Diversifying is a type of business by which the proprietor (franchisor) of an item, administration or strategy gets circulation through partnered merchants (franchisees). is the act of the privilege to utilize an association's plan of action and brand for a recommended timeframe. "Franchise" is of Anglo-French deduction—from franc, which means free—and is utilized both as a thing and as a (transitive) verb. For the franchisor, the establishment is a contrasting option to building "chain stores" to appropriate merchandise that maintains a strategic distance from the ventures and risk of a chain. The franchisor's prosperity relies upon the accomplishment of the franchisees. The franchisee is said to have a more noteworthy motivating force than an immediate worker since they have an immediate stake in the business.

2. What are the disadvantages of investing in a franchise?

Advantages of investing in a franchise

(i)  Increased Profits:

All things considered, franchising is a brilliant intends to make a greater amount of it. When you offer an establishment, what the franchisee truly purchases is your demonstrated "formula" for progress: your plan of action, your image, your framework. Consequently, you benefit - and the first offer of the establishment is recently the start. As a franchisor, you additionally gather income from continuous sovereignties, benefit expenses and the offer of items or gear

(ii) Increased Market Share:

In the event that you need to defeat your rivals, there's no preferable route over to build up a solid market nearness. With different establishment areas, you can quickly and quantifiably increment your piece of the overall industry without the bother - or cost - of building up organization claimed stores. What's more, to sweeten the deal even further, every advertising undertaking can be facilitated to profit each establishment proprietor and the parent company (that implies you)

(iii) Reduced Expenditures:

What amount does it cost to open another area? At the point when your franchisees are retaining the cost, your expenses are for all intents and purposes disposed of. Notwithstanding the privilege to wind up noticeably a piece of your framework, your franchisees are likewise accepting the money related accountability to influence the business to work. Also, that incorporates land costs, gear, furniture, stock, supplies, worker compensation, finance charges and working capital.

Disadvantages of investing in a franchise

(i) Loss of ownership:

The most evident drawback to franchising is that a franchisor needs to share responsibility for idea or item which it has detailed and created. With the wrong accomplice this can negatively affect both feasible benefits and notoriety. Despite overheads, organization possessed outlets can even now be more productive to a franchisor than diversified outlets where the franchisor's arrival is constrained. This is especially the situation where the franchisor's principle wellspring of income is a proceeding with establishment expense which is communicated as a level of the franchisee's gross turnover.

(ii) Loss of flexibility:

Franchised outlets can be slower to respond to changes in the market and it can take more time to present another scope of items or administrations inside a diversified system than in a chain of organization claimed stores. It is vital that franchisors keep up a harmony between organization possessed stores and diversified outlets as it is less demanding for a franchisor to present a change where it depends on its own understanding.

(iii) Confidentiality:

By including outsiders in its business a franchisor will definitely need to unveil its classified data and know-how concerning its business and frameworks. Despite the fact that a planned franchisee is normally obliged to consent to a secrecy arrangement and the establishment understanding contains limitations on his capacity to make utilization of this data for his own particular purposes, these arrangements are regularly hard to screen and costly to authorize.

3. Suppose that one of your friends who is about to graduate is considering purchasing a franchise. What advice would you offer him or her before signing the franchise contract?

For my a friend considering buying a franchise, this are the ten things i will tell her to consider:

(i) Analyse the franchisor's business track record :

What's the story on the franchisor's business record and notoriety?

Have you addressed existing franchisees?

Have you reached government purchaser security offices, Canadian Franchise Association and your neighborhood Better Business Bureau?

Is the franchisor's framework thorough and stable?

Are there any exceptional lawful activities against the franchisor?

(ii) Analyse financial strength of the franchisor :

Is the franchisor fiscally solid and stable?

Does the franchisor give money related data which you can take to your bookkeeper?

What is the foundation and experience of senior administration?

Is it accurate to say that you are sure the franchisor will even now be ready to go numerous years from now?

Does the franchisor make accessible a "Divulgence" record?

(iii) Analyse franchisor's plans for expansion and growth:

What is the franchisor's arrangement for focused development?

What are the objective markets for development?

Will your establishment be found where the activity and request are probably going to be?

It is safe to say that you are guaranteed of selective rights to the franchisor's item and administration in the territory where you wish to find?

(iv) Look at the proposed legal agreement made between himself ; and the franchisor:

Have you looked into it with a free legal advisor who has practical experience in establishment law?

Are the terms of the assention in accordance with your desires?

Does it cover the difficulties you will look in maintaining an autonomous business?

Do you feel strain to sign before you're totally prepared?

(v) Make a consideration of the Consumer demand for franchisor's product or service :

Is there solid buyer interest for it? Is the request anticipated that would proceed?

Are there numerous contenders? Could more contenders enter the market in the following couple of years?

Is the item or administration of extraordinary quality?

How does its quality contrast with the opposition?