Advantages and Challenges of Franchising
Every business model has some advantages and some challenges. The key is to identify these points and analyse their impact on ones business model.
A franchise system has a number of benefits, which include:-
• Established systems: - An established system saves time and effort in planning a campaign for brand recognition and gives customers a level of comfort that they can expect from existing brand.
• Purchasing power: - Purchasing power means one has to spend less money, which helps in increased profits. It enables one to enjoy lower overhead as the franchisee is buying everything in bulk and additionally, the logistics and troubleshooting is already been done for them.
• Advice from other franchisers: - In a franchise system, there is no such thing as a first time job, because someone or the other has experienced it before. So, if the inexperienced franchisee needs some help the experienced one is always there for the rescue.
• Marketing & Finance advantages: - A franchisee usually benefits from a combined marketing in a franchise as the marketing and promoting costs are borne by the franchiser. Additionally, this gives the franchisee the benefits of name and brand recognition. Plus, they usually have a backing of a reliable franchise, which makes it convenient for them to get sufficient funds at reasonable rates.
Some of the challenges faced by a franchisee
• Following brand standards:-Brand standards also lead to challenges sometimes, if one follows all brand standards and others do not, it affects the franchisee’s business.
• Relying heavily on parent company: - Another challenge is relying heavily on the parent company services, a franchisee should know what services and guarantees does his/her parent company offer and be realistic about it.
Franchising is a form of business wherein the more one knows about the challenges involved the more likely he is to become a successful franchisee.