University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Advantages and disadvantages of franchising
Franchising has exhibited dramatic growth since it offers some significant advantages when compared to other distribution methods. When starting a business or venturing into entrepreneurship, it is imperative for one to consider all options. One of the most suitable ways of achieving such an objective is to buy into a franchise. Business are able to expand by franchising in order to gain access to external capital that can fund growth of new outlets or stores that are run by committed and profit driven franchisees CITATION Fra12 l 1033 (Frazer, Merrilees, & Wright, 2012). These franchisees are more likely to be focused and diligent than employed staff. Therefore, Franchising allows individuals to become their own boss. For people who want to apply franchising in the Chinese market, they may wish weight all options.
Franchising is one the best solution for transitioning from employment to a business owner. There are several businessmen and businesswomen who have thrived and successfully transformed their financial lives through franchising. Venturing into franchising has its benefits and also some drawbacks. Besides the startup capital required to become a franchisee, there is little planning and thought that is required when setting up the new business. The new store or outlet has to conform to the image that the franchisor has already set up. Small details such as the color scheme, to the inventory items to be placed on the menu or on the shelves, are all determined by the franchisor. This arrangement makes is easier for the franchisee to set up the business and increases the chances of success CITATION Hun11 l 1033 (Hunter, 2011).
Most franchisors give the franchisee detailed training in order to ensure that they develop the required level of expertise to achieve profitability. This allows the franchisee to have a piece of minds knowing that the company is steering the business in the right direction. One does not have to develop an advertising strategy or solid branding as this is done by the franchisor.
Although franchising might be perceived as an ideal solution by some individuals, others cite throwbacks of the business model. Therefore, they prefer multi-level marketing or network marketing, which allows one to become a distributor of a product of and established and a reputable company. This allows one to leverage on the advantages of being a franchisee whilst overcoming some of the disadvantages associated with it CITATION Hun11 l 1033 (Hunter, 2011).
Firstly, multilevel marketing or network marketing products usually have a good level of branding in that, consumers are able to recognize the product that is offered to them. Although franchisees also have this advantage, they do not have the freedom to come up with unique structures when it comes to the distribution business. Network marking will, therefore, allow one to have free reign to market their business in whichever way they like CITATION Fra12 l 1033 (Frazer, Merrilees, & Wright, 2012).
Another advantage that network marketing has over franchising is that little startup capital is required to become a distributor. One is only required to pay a little amount of money to join a network, while some networks require annual fees CITATION Hun11 l 1033 (Hunter, 2011). Additionally, one may be required to purchase the product in advance so that it can be delivered to the customers as the sales are made. All in all, the total amount of money required to run a profitable network is far less than what is required when one is a franchise.
BIBLIOGRAPHY Frazer, L., Merrilees, B., & Wright, O. (2012). Power and control in the franchise network: An investigation of ex-franchisees and brand piracy. Journal of Marketing Management, 11-29.
Hunter, R. (2011). MASTER FRANCHISING AS AN ENTRY STRATEGY: MARKETING AND LEGAL IMPLICATIONS. The Coastal Business Journal, 16-27.