ADVANTAGES AND DISADVANTAGES OF FRANCHISE?

Introduction

Franchising is the practice of the right to use a firm's business model and brand for a prescribed period of time. The word "franchise" is of Anglo-French derivation—from franc, meaning free—and is used both as a noun and as a (transitive) verb. For the franchisor, the franchise is an alternative to building "chain stores" to distribute goods that avoids the investments and liability of a chain. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because they have a direct stake in the business.

Thirty-three countries—including the United States and Australia—have laws that explicitly regulate franchising, with the majority of all other countries having laws which have a direct or indirect impact on franchising.Franchising is also used as a foreign market entry mode.

Social franchises

In recent years, the idea of franchising has been picked up by the social enterprise sector, which hopes to simplify and expedite the process of setting up new businesses. A number of business ideas, such as soap making, wholefood retailing, aquarium maintenance, and hotel operation have been identified as suitable for adoption by social firms employing disabled and disadvantaged people.

The most successful examples are probably the Kringwinkel second-hand shops employing 5,000 people in Flanders, franchised by KOMOSIE, the CAP Markets, a steadily growing chain of 100 neighbourhood supermarkets in Germany. and the Hotel Tritone in Trieste, which inspired the Le Mat social franchise, now active in Italy and Sweden.

Social franchising also refers to a technique used by governments and aid donors to provide essential clinical health services in the developing world.

Social Franchise Enterprises objective is to achieve development goals by creating self sustainable activities by providing services and goods in un-served areas. They use the Franchise Model characteristics to deliver Capacity Building, Access to Market and Access to Credit/Finance.

Event franchising

Event franchising is the duplication of public events in other geographical areas, retaining the original brand (logo), mission, concept and format of the event. As in classic franchising, event franchising is built on precisely copying successful events. An example of event franchising is the World Economic Forum, also known as the Davos forum, which has regional event franchisees in China, Latin America, etc. Likewise, the alter-globalist World Social Forum has launched many national events. When The Music Stops is an example of an events franchise in the UK, in this case, running speed dating and singles events.

Home-based franchises

The franchising or duplication of another firm's successful home-based business model is referred to as a home-based franchise. Home-based franchises are becoming popular as they are considered to be an easy way to start a business as they may provide a low barrier for entry into entrepreneurship. It may cost little to start a home-based franchise, but experts say that "the work is no less hard."According to America's Best Franchises, there are many benefits to choosing to become a home-based franchisee, "but having a home based business doesn't offer any guarantees as you will encounter many challenges you'll have to learn to overcome.Courtesy of wikipedia....

ADVANTAGES

1. Franchises have a higher rate of success than start-up businesses.
2. You don't necessarily need business experience to run a franchise. Franchisors usually provide the training you need to operate their business model.
3. Franchises offer the independence of small business ownership supported by the benefits of a big business network.
4. A franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily takes years to establish.
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6. It may cost less to buy a franchise than start your own business of the same type.
7. The risk of business failure is reduced by franchising. 
8. Your business is based on a proven idea.
9.  You can check how successful other franchises are before committing yourself.
10. The franchisor won't sell any other franchises in the same territory.
11. You can benefit from communicating and sharing ideas with, and receiving support from, other franchisees in the network
12. The franchisor gives you support - usually as a complete package including
13.  training
14.  help setting up the business
15. a manual telling you how to run the business AND ongoing advice.
16. No need of high advertising because You used a recognized brand name and trade mark.
17. Franchises offer important pre-opening support: site selection, design, construction, financing, training, and a grand-opening program 
18. Franchises offer ongoing support: training national and regional advertising operating procedures, operational assistance, ongoing supervision and management support, increased spending power, and access to bulk purchasing.

DISADVANTAGES

• Buying a franchise means entering into a formal agreement with your franchisor.
• Franchise agreements dictate how you run the business, so there may be little room for creativity.
• There are usually restrictions on where you operate, the products you sell and the suppliers you use.
• Bad performances by other franchisees may affect your franchise's reputation.
• Buying a franchise means ongoing sharing of profit with the franchisor.
• Franchisors do not have to renew an agreement at the end of the franchise term.
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• Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor.
• The franchisor might go out of business.
• You may find it difficult to sell your franchise - you can only sell it to someone approved by the franchisor.
• All profits (a percentage of sales) are usually shared with the franchisor.
• The inflexible nature of a franchise may restrict your ability to introduce changes to the business to respond to the market or make the business grow....