Examining the benefits of franchising to the franchisee

Every year hundreds of businesses go public or franchise in order to access external capitals. In this scenario investors/franchisees risk their capital in order to prosper along with the mother business. The Franchisee can benefit from the franchising business in numerous ways. Franchising business can reduce the risk of opening a new business by granting the credibility of franchiser, a proven business system, standardized quality of good and services, training and support, nationwide advertising, financial assistance, and more.        

A known brand name and an identifying trademark is one of the biggest advantages of franchising. Consumers are more comfortable doing business with a company they know and trust. A new burger stand in the block needs to spend great amount of time and effort to attract local customers, but a new McDonald franchise attract its customers instantly. Customers walking in McDonald know what they are looking for so they acquire it, but customers walking in a new store may or may not walk out the door with a smile. Not only the franchiser allows the usage of its name and credibility, it makes sure the franchisee maintain the standard quality of goods and services.

By introducing a proven business system, franchiser can help franchisees to establish their businesses much faster, more efficiently, and more effectively than if they ran their own businesses. Franchiser coordinates training sessions for management before opening the franchise. They place national advertising campaigns, assist and direct the franchisee with finances, provide supplies, assist to select site, and may place a territorial protection for the franchisee. 

 Entrepreneurs who want to open their own businesses set themselves up to a world of unknowns. According to statistics the new entrepreneurs have %40 chance of survival in the first five years comparing to %90 surviving franchisees and only %20 percent chance of survival after a decade comparing to %85 of franchisees. It is true that entrepreneurs do not have the freedom in franchise business as oppose to self-operated business, but the truth is in today’s economy not everyone can afford to pay the price of a failed business so it might be safer for beginner entrepreneurs with little or no experience to choose franchising as their path.

    Resource:

Scarborough M. Norman, Wilson L. Douglas, Zimmerer W. Thomas; Effective Small Business Management, Pearson Prentice Hall, Upper Saddle River New Jersey: 9^th Edition.