Management Notes

Reference Notes for Management

Which of the following is an advantage of franchising

Which of the following is an advantage of franchising

  • a) The franchisee can easily establish a business with reduced risks
  • b) The franchisee can create an individual identity in the community
  • c) The franchisee enjoys maximum independence in running the venture
  • d) The franchisee is not required to pay a start-cost
  • e) The franchisee gets to modify the franchiser’s products

Other Advantages of Franchising are as follows:

a) Franchise agreements serve as symbolic agreements between franchisors and franchisees. There are numerous advantages to franchising for franchisees.

b) In general, franchising makes it easier for franchisees to get started as they get a business model that is already market tested and proven to work. It is therefore much safer to buy a franchise than to start from scratch.

c) It decreases the likelihood of failure. It is important to note that less than 10 percent of franchises fail. This is in stark contrast with the fact that two out of five entrepreneurs who start on their own fail within three years and eight out of ten fail by their tenth year.

d) It is an important advantage of a well established franchise to be recognized. The first few months and years after starting a business can be lean for many new businesses. A business is more likely to fail if it must experience it for a longer period of time. The agency period may be reduced to just a few weeks or even days with a well-tested franchise.

e) The franchisee’s purchasing power may also increase as a result of franchising. A large, well-known company offers discounted prices on equipment, supplies, services, insurance, and many other items. Furthermore, it means that you will receive better service from suppliers due to the importance of the organization (franchise) in which you work (if you are part of a franchisee).

f) A franchisee gets the benefit of the franchisor’s research and development.

g) Within a given area, the franchisee has privileged or protected rights.


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