What are the main benefits (to the franchisee) of franchising?
What will be an ideal response?
Product Acceptance: The franchisee does not have to spend resources trying to establish the credibility of the business. That credibility already exists based on the years the franchise has existed.
Management Expertise: Each new franchisee is often required to take a training program on all aspects of operating the franchise. This training could include classes in accounting, personnel management, marketing, and production. In addition, some franchisors require their new franchisees to actually work with an existing franchise owner or at a company-owned store or facility to get on-the-job training. Once the franchise has been started, most franchisors will offer managerial assistance on the basis of need.
Capital Requirements: The franchise offers an opportunity to start a new venture with up-front support that could save the entrepreneur significant time and possibly capital. Savings through health care, insurance, marketing and inventory economies of scale. Other benefits from franchisor in terms of inventory control assistance and building assistance.
Knowledge of the Market: Any established franchise business offers the entrepreneur years of experience in the business and knowledge of the market. This knowledge is usually reflected in a plan offered to the franchisee that details the profile of the target customer and the strategies that should be implemented once the operation has begun.
Operating and Structural Controls: Two problems that many entrepreneurs have in starting a new venture are maintaining quality control of products and services and establishing effective managerial controls. The franchisor, particularly in the food business, will identify suppliers that meet the quality standards established. In some instances, the supplies are actually provided by the franchisor. Standardization in the supplies, products, and services provided helps ensure that the entrepreneur will maintain quality standards that are so important. Administrative controls usually involve financial decisions relating to costs, inventory, and cash flow, and personnel issues such as criteria for hiring and firing, scheduling, and training to ensure consistent service to the customer. These controls will usually be outlined in a manual supplied to the franchisee upon completion of the franchise deal.
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