Question

What are the two advantages and two disadvantages of franchising to the franchisee?

Answer 1

Answer:

AdvantagesDisadvantagesExpansion can be faster because franchisees provide the labour and their sales provide the growthFranchisees cannot be managed as closely as employees and they may have different goals to the franchisorFranchisees are responsible for their company’s success so they are more motivatedFranchise recruitment can be slower and less efficient than employee recruitmentFranchisees may be more talented at growing the business and turning a profit than employees would beFranchisors earn royalties from sales. Franchisees earn money from profits. Achieving growth in both isn’t always possible, potentially causing conflictThe franchisor puts relatively little money into new locations as this comes from the franchiseeFranchisees don’t always work together like employees might, thus losing any potential collective benefitSuccessful locations can return high royaltiesThe upfront investment (time and money) required can be huge – a pilot operation may need to be testedConsistent operations across the business generally means improved efficiency and higher quality levelsSelecting one wrong franchisee can ruin the reputation of the whole franchiseFranchisees should be fully committed due to the investment they put inSharing confidential information with franchisees is risky if they are not fully committed to the business