Advantages And Disadvantages Of Franchising.

Franchise companies have lately become very popular. Franchise operations are most prevalent in fast food, retail sales and hospitality industries.

Franchising, commercial concession, franchise (from Fr. franchir, «free”) – is a kind of relationship between market subjects, when one party (the franchisor) transfers to another party (franchisee) for a fee (royalty) the right to a certain type of business, using a developed business model of reference. This is an advanced form of licensing, in which one party (the franchisor) grants another party (franchisee) the gratuitous right to act from his name, using the trademarks and / or brand of the franchisor.

An individual item of the contract may be conditions for the use of a trademark / brand. These requirements can be very simple (for example, franchisees can use the brand in a particular industry) and hard (for example, the franchisee agrees to use the equipment in a shop in strict accordance with the requirements of the franchisor, from the sizes and colors of the shelves to the uniforms of staff).

Franchising involves buying the right to create business in accordance with certain formula. The buyer acquires the right to use the name of the business, logo and other external details. In addition, the buyer may receive a physical equipment, materials and the right to receive counseling, educational materials, business plan and assistance in marketing from the owner. In some cases, the owner- franchisor may provide financial assistance. In exchange for foregoing advantages the buyer pays the original purchase price and makes monthly payments based on sales volume. The buyer also agrees to comply with various conditions associated with the use of business, the consistency of quality standards, and financial participation in marketing campaigns. In addition, the buyer may have to procure materials only from the franchisor.

Franchise operation has both advantages and disadvantages.

On the positive side, franchised operation gives the opportunity to participate in a proven business – the scheme that significantly increases the likelihood of success. At that time, as only 20-30% of new businesses survive the first few years of operation, the total number of franchised operations achieves success around 80%. The buyer receives a number of conditions of support, advices and conditions of assistance covering the entire spectrum of work. At the same time, it is easier for a novice entrepreneur to get a loan in the bank or investment company, if he buys the franchise.

On the other hand, franchise operations have their limitations. They oblige the buyer to follow exactly a set formula of doing business. The buyer must strictly observe the structure of payments, defined by a franchisor. Such conditions may seem unattractive to entrepreneurs who want to pursue their own business reasons and creative ideas. In addition, franchise operations can be extremely demanding with regard to workload and maintain performance of standards of the franchisor. Requirements for all purchases of materials exclusively from the franchisor may be extremely disadvantageous. In addition, it can be assigned restrictions of the franchise buyer to acquire additional company to expand product line or accelerate a profitable growth.

Business is a dream for many people. But nowadays business has become not only a kind of activities and occupation – it has changed into the article of trade. It is not a rare case today when someone buys and sells businesses just to make money on it. Whereas another part of businessmen sells their businesses because of some troubles or inability to conduct it any more. In any case when selling a business it is better to address to experts who deal with it. And here business for sale site would be of much help because there one can find much details related with this process. Those who live in Canada are welcomed to go to toronto business for sale or vancouver business for sale experts.

And keep in mind that before dealing with any issue it is smart to investigate it. And today it is quite easy to do as Internet technologies give a nice opportunity to find anything you require.

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  1. Really enjoyed this post.Thanks Again. Really Cool.

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