Question

Discuss the benefits and challenges of franchising: ​ (a) to the franchisee (i.e., for the individual who buys a franchise), and (b) the franchiser (i.e., the firm that grants the right and license to sell a product or provide the service to another individual or firm).

Answer 1

The benefits of franchising are similar for both the involved parties, but, we can say that:

FRANCHISEE

ADVANTAGES

1. The advantages include a brand name, value as well as the expertise that comes with their name.

2. A proven business plan.

3. Market direction, as well as the fact that the franchisee can focus their time, money and research towards getting a better supply chain rather than procuring or designing a product.

DISADVANTAGES

1. Disadvantages for a franchisee includes having to pay a royalty for the expertise of the franchisor.

2. Restrictions in business models and demands that need to be adhered to in the contract.

FRANCHISOR

ADVANTAGES
1. The advantage for a franchise includes the ability to penetrate another market.

2. Franchising is easier than another mode of entry such as acquisition, mergers or greenfield investments.

3. They can easily study the marker and use this to their advantage when they decide to set up their own business process in the target country.

DISADVANTAGES

1. Disadvantages include the threat of creating further competition in the market as the franchise might pose a threat in the future.

2. Loss of quality and control over the processes of the franchisee.

3. Brand name and reputation can be lost in the process.