Question

State and explain five (5) challenges of franchising.

Answer 1

Answer: Franchising- It is an arrangement in which one party (Franchisor) gives right and license to (Franchisee) to sell any product or service. It is good business strategy to expand and grow the business.

Challenges of Franchising- Are as following:

1. There is always a risk involved in the franchising business. It may not work or may be shut down due to non growth, so there is business risk in franchising, people rely on the parent company and sometimes they do not rely on the products and services provided through franchising.
2. Sometimes maintaining franchising business is a burden for those who do not have business experience. Some people do not want to work under direction or with the system, those people may find the franchising difficult.
3. If franchising business is not doing well, quality is not being maintained and franchisee is working for meeting targets and profit motive then Brand value and goodwill of company can come down.
4. Sometimes setting up the franchising business is too costly and time taken. It incurs maintenance and training cost.
5. Franchise does not have any control over the business, it has to follow the instructions and policies of franchisor. Franchisee has to pay royalty and share the part of profits also to franchisor.