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Introduction to Franchising



Kirjoittanut: Peetu Nieminen - tiimistä Crevio.

Esseen tyyppi: Yksilöessee / 2 esseepistettä.
Esseen arvioitu lukuaika on 3 minuuttia.

Introduction

 

Franchising is a form of business model in which a company, usually referred to as the franchisor, grants the right to its trademark, business model, and operating systems to another person or a company. This company is thereafter referred to as the franchisee, who will in return give the franchisor ongoing royalties for these services on top of the initial franchise fee. Franchising is commonly used all over the world in various industries, such as fast food, health, and retail. Franchising is a popular way for entrepreneurs to start their own business while benefiting from the proven success of an established brand and business model.

 

Becoming a franchisor

 

Franchising offers a mutually beneficial partnership between the franchisor and the franchisee, providing opportunities for growth and development for both parties involved. The franchisor has the ability to expand its business quickly without the need for significant capital investment or direct management of each new location. The franchisor also gains the initial capital from the franchise fee on top of the ongoing royalties, which can provide financial security and balance to the franchisor. Franchising can help the company to gain recognition and build awareness, as each franchise location contributes to the overall brand image. However, it’s important for franchisors to carefully select and train their franchisees to maintain a consistent brand standard and quality across all franchise locations.

 

Becoming a franchisee

 

For the franchisee, the main benefit that they will gain from franchising is the use of an established brand that has proven itself to be successful. The franchisee also has the support of the franchisor in the form of assistance with marketing, training, and operational support. Franchisees also have an easier time obtaining financial support from banks and other investors, since the franchise system has a proven track record. Franchisees can also benefit from the increased purchasing power of the franchise, which can help them function more effectively and cost-efficiently. However, franchising is not a guarantee for success. Becoming a franchisee can be expensive due to the initial franchise fees and ongoing royalties. The creativity and flexibility of the franchisees is also limited due to the guidelines set by the franchisor. Franchisees can also have limitations on the locations that they can operate in, which can lead to limitations in growth potential.

 

Reflections

 

After doing research on franchising, I believe that it’s a valid option to consider when starting your journey as an entrepreneur. The initial risk and burden of creating a business can sometimes feel overwhelming, but through franchising it might be easier to get started while still gaining the experience of running your own company. Although, I do dislike the restrictions in creativity that you may face when partnering with a franchisor, but then again, the importance of research plays a big role while deciding between different companies. Once you find a company whose values match yours, it’s less likely that there will be friction between you and the franchisor. Looking at it from the franchisor’s perspective, I wouldn’t be against becoming a franchisor in the future. However, I think that trust plays a massive role in franchising, and I think that the biggest obstacle to becoming a franchisor would be to find people that you can truly rely on.

 

In conclusion, I believe that franchising can offer several benefits for both the franchisor and franchisee. For the franchisor, franchising can allow rapid expansion, a steady source of revenue, and the ability to maintain control over the brand and business operations while expanding the business. For the franchisee, franchising would offer an established brand, training and support, reduced risk, and access to resources through the franchise system. Overall, I feel franchising can be a considerable option for entrepreneurs who want the support and structure of an established brand and business model, but it’s important to weigh the pros and cons and do thorough research before making a decision.

 

 

Sources:

Franchise Direct. “What is Franchising? Definition and Meaning”. Retrieved from https://www.franchisedirect.com/what-is-franchising-definition/

International Franchisee Association. “What is a Franchise?”. Retrieved from https://www.franchise.org/faqs/basics/what-is-a-franchise

 

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