Question

Explain in paragraph format

Explain franchising with examples. Mention the advantages and disadvantages associated with franchising. How is franchising different from licensing?

Answer 1

SOLUTION:-

Franchising:

It is a business model where the franchiser is an established and they render their brand name, products and the work process to others called the franchisee to carry out the same business in another location. The franchiser pays a one-time franchise fee and also a part of the sales revenue as part of royalty.

There are three types of franchsing, namely;

* Product Frachising:

This is one of the oldest forms in franchising. It includes the rights given by the maufactures to sell their products and the manufactured goods.

* Manufacturing Franchising:

The franchiser would allocate the rights to the franchisee to produce the same products in a particular area.

* Business format Franchising:

The business techniques such as marketing, strategic planning, advertising, production, quality control, etc will be shared by the franchiser.

Examples of franchising:

There are many organizations which have given their brands to be franchised. This has enabled them to have branches and spread out their outles throughout the globe. Some of the examples are Burger King, Pizza Hut, McDonalds, Coca-Cola, and Starbucks.

Advantages and Disadvantages:

Advantages	Disadvantages
Risk of business failure is reduced	Costs are higher than expectation.
Market share is already established	Lots of restrictions in running the business
Support from the franchiser	Franchiser monitoring becomes intrusive.
Prior experience is not neccessary	Profits are shared with the franchisor.
Advertising and promotion is easy	Limited product range.

Comparison with licensing:

Like the franchisee the trademark and brand logo can be licensed. There is a fee to be paid for licensing. The licensor dose not have control after the licensing is done. Also there would be no help or support received from the licensor end. Contract law is applicable for this type of business model.

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