Question

36-1 Franchising

Maria, Pablo, and Vicky are recent college graduates who would like to go into business for themselves. They are considering purchasing a franchise. If they enter into a franchising arrangement, they would have the support of a large company that could answer any questions they might have. Also, a firm that has been in business for many years would be experienced in dealing with some of the problems that novice businesspersons might encounter. These and other attributes of franchises can lessen some of the risks of the marketplace. What other aspects of franchising—positive and negative—should Maria, Pablo, and Vicky consider before committing themselves to a particular franchise? (See Franchise Termination.)

Answer in IRAC Format

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Answer 1

Franchising

Franchising is the long-term cooperative relationship. It is the relationship between two parties i.e.: franchisor and more than one franchisee. Franchising is based on agreement in which franchisor grants the licensed .It is right to franchisee for carrying out the business. Along with this, there may numerous positives and negative aspects of the franchise which Maria, Pablo, and Vicky might consider before committing themselves to the particular franchise. These are listed as under:

Positive Aspect of Franchising

• It is Safe and Risk-Free
• It require Less Investment
• It require fewer Efforts
• Easier To Take Funding
• It will increase Profits
• It reduces Expenses
• It create Brand Awareness
• Corporate Image will be better
• Chances of higher Rate of Success

Negative Aspect of Franchising

• In franchisee there is chance of "Loss Of Control"
• It create conflict Between Franchisee And Franchisor
• Restrictions are also negative aspect of franchising
• Lack of Freedom
• Less Autonomy in the Business Decisions
• Innovation Challenges