Question

As Lululemon was building its business, it entered into franchise agreements to more quickly expand its brand name and increase sales. Today, this opportunity has all but disappeared with less than 5% of sales coming from its early franchises. Why do you think we see so few franchise opportunities in apparel retail as compared to franchise opportunities in the fast-food retail industry?

Answer 1

The retail sector of franchising is huge.But owning a retail franchise-like all franchise opportunities, has its pros and cons.

Even if there are some advantages in retail franchising, there are many disadvantages that makes the fast food franchises get more opportunities than retail franchises.

Some of the cons are:

• Fixed cost will be very high

You’ll need to lease a physical space, have inventory, employees, and insurance for your business.

And if you decide to become the owner of multiple franchise units, your fixed expenses will increase.

• Online retailers competition

Growth and convenience of shopping for items online has affected retail storefront operators.today’s technology makes it easy to shop and do research online for a myriad of products.

• Customers can be fickle

The law of retail states that once you’ve figured out what your customers like, they move onto something else.

Situations like that tend to frustrate retail franchise store ownerson a fairly consistent basis. And they can be costly.

Therefore, fast-food franchises have more opportunities than retail apparel franchises.

Some of the pros are-

• Funding -

     for food operation businesses is usually simple with banks because they typically know what is involved with opening a restaurant therefore the bank knows exactly what to look for to make them feel comfortable approving the loan.

• Simple set up-   Franchises are relatively simple to set up and usually require an initial start-up cost to be paid from a franchise owner towards the franchisor along with an annual licensing fee.

• Increasing demand for fast food

  In a country of 1.37 billion with 65% of its population under 35 years of age and over 600 million internet users, international exposure to various cuisines and global trends have played a crucial role in shaping the consumer preferences

These gives more opportunities to fast food franchises than retail apparel franchises.