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5 Advantages of Franchising to a Franchisee (Business Growth Series 4)



Product acceptance, management expertise, meeting capital requirements, knowledge of the market, as well as operating and structural controls etc. are some areas that entrepreneurs have problems when starting a new business. The risks associated with the above factors are minimized through the franchise relationship. Recommended Article – Types of Franchising (Business Growth Series 3) Here are ... Continue Reading

Product acceptance, management expertise, meeting capital requirements, knowledge of the market, as well as operating and structural controls etc. are some areas that entrepreneurs have problems when starting a new business.

The risks associated with the above factors are minimized through the franchise relationship.

Recommended Article – Types of Franchising (Business Growth Series 3)

Here are some advantages a franchisee can benefit from franchising

  1. Product Acceptance:

An entrepreneur who tries to start a new business would be unknown to potential customers and would require significant effort and resources to build credibility and a reputation in the market.

The franchisee usually enters into a business that has an accepted name, product or service.

As a franchisee, you do not have to spend resources trying to establish the credibility of the business which already exists based on years the franchise has existed.

  1. Management Expertise:

The franchisor also provides management assistance to the franchisee.

The new franchisee is required to take a training program in all aspects of operating the franchise.

The areas of training include accounting, personal management, marketing and production.

Some franchisors in addition require new franchisees to actually work with an existing franchise owner or at company owned stores or facilities to get on-the-job training.

Managerial assistance on the basis of need and toll free numbers are also available so that the franchisee can ask questions anytime.

The training and education offered is actually an important criterion that every entrepreneur should consider in evaluating any franchise opportunity.

  1. Capital Requirements:

Starting a venture is mostly capital intensive and time consuming.

The franchise offers an opportunity to start a new business with up-front support that could save the entrepreneur significant time and possibly capital.

Some franchisors finance the initial investment to start the franchise operation, conduct location analysis and market research of the area (i.e. assessment of traffics, demographics, business conditions and competitions).

The initial capital required to purchase a franchise generally reflects a fee for the franchise, construction costs and the purchase of equipment.

The entrepreneur could save a lot of funds since the franchise could also allow him or her to make use of health care facilities and business insurance as they are taken as part of the parent company.

Savings could also be reflected in individual franchisee poling of money for advertising and sales promotion.

The contribution by each franchisee is usually a function of the volume and the number of franchisees owned.

  1. Knowledge of the Market:

An established franchise business offers the entrepreneur years of experience in the business and knowledge of the market and this is normally reflected in the plan to the franchisee that details the profile of the target customer and the strategies that should be implemented once the operation has begun.

Given their experience, franchisors can provide advice and assistance in accommodating any of these differences.

Most of the franchisors will be constantly evaluating market conditions and determining the most effective strategies to be communicated to the franchisees.

  1. Operating and Structural Controls:

In starting a new venture, an entrepreneur is faced with the problem of maintaining quantity or quality control of products and services and establishing effective managerial controls.

The franchisors especially in food businesses will identify suppliers that meet the quality standard established.

They can perform the functions of suppliers to the franchise standardization in the supplies of products and services provided; help ensure that the entrepreneur will maintain quality standards that are so important.

Standardization also supports a consistent image on which the franchise business depends for expansion.

The above advantages to the franchise also represent important strategic considerations for an entrepreneur who is considering growing the business by selling franchises.

Photo Credit – Forbes.com


© 2015. Courtesy: Nigerian Scholars

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