Advantages of owning a franchise Term Paper Example | Topics and Well Written Essays - 1000 words

Advantages of owning a franchise - Term Paper Example Over the recent years, franchising has become a beneficial venture and has attracted many entrepreneurs. Franchise refers to the license describing the relationship between two individuals; the franchisor and franchisee (Inma, 2005). In this case, the license includes support, control, trademarks and fees. Franchising allows the goodwill, reputation, expertise, and technical knowledge of the franchise to be used together with the investment of the franchisee so as to produce and sell goods and services. In other words, a franchise is a form of business that involves one organization using another organization’s successful business model. Owing to its effectiveness in combining the skills, investments, expertise, and knowledge of the franchisor and the franchisee, franchising has become more and more popular among business people over the last few years. There are several advantages of owning a franchise which are having: continual support, financial assistance, and proven prof itability. Continual Support One main advantage of franchising is that the franchisee is subject to continued support from the franchisor. Owning a franchise helps one to get various forms of support such as pre-opening training in which one is trained about the technologies, operations, marketing and financial aspects of a business. During pre-opening training, the franchisee is trained on how a particular business operates and how to handle matters that the business may face (Kong 2011). In other words the franchisee enjoys ongoing support as the situation dictates, the franchisor acting as a mentor to the franchisee. In this respect, the franchisee and their employees may receive continuous training as and when the need arises. Given that the franchisor benefits from the success of the franchisee, they are bound to go an extra step to ensure that the franchisee succeeds in business. This being the case, the franchisor will always be ready to offer continuous technical support to the franchisee which is good for the wellbeing of the business and both of the parties. The franchisee can also be offered financial support for advertising and promotion by the franchisor. It is important for an entrepreneur to understand the different aspects of the business they intend to engage in. In many cases, businesses wind up simply because the entrepreneur lacks the requisite skills and knowledge, technologies, finances, or support. While these are some of the challenges that people who engage in other forms of businesses face, a person who starts a franchise has higher chance of succeeding. With this kind of support, the franchisee is able to start and grow his/her venture very fast without many problems associated with lack of knowledge and finances. Financial Assistance The second advantage of franchising is that unlike it happens with other forms of businesses, a franchisee can easily receive financial support to start and run a franchise. It is well known that many q ualified franchisees do not have enough capital to run an outlet. The franchisor may finance the franchisee either directly or through third parties (Beshel 2001). With respect to third party financing, the franchisee is financed by a third party but the franchisor acts as guarantor. If the cost of general advertizing is high, the franchisor may also offer financial assistance to the franchisee so as to help in increasing sales. This is aimed at generating more income to recover the advertizing costs. In other cases, the franchisor may opt to temporarily exempt the franchisee from paying the franchising fees or remitting a share of the profit so that the franchise may achieve stability. With the franchisor offering financial support, the franchisee is able to set up an outlet even if he has limited capital. Proven Profitability Franchises are generally associated with high success levels and, therefore, high profitability. Operating a sole proprietorship,