Emerging Opportunities In Business 6x2lt

BINAYAK ACADEMY, Gandhi Nagar 1st Line, Near NCC Office, Berhampur No: 9776486185, 8270407323 FRANCHISING It is that special right or freedom which is given by a producer to a particular individual or a group of individuals to start the same business at a particular place being done by the producer. This system is generally adopted by those producers who enjoy a lot of goodwill. There are two parties in this type of agreement- one who grant the right is known as FRANCHISER and the other person to whom the right is granted is known as FRANCHISEE or FRANCHISE HOLDER. There are a lot of companies who provide such franchise is Narula’s, Haldi Ram, Dominos, McDonald etc.

Features 1. Right to use the name: Under this agreement the right to use the name transfer to the franchise holder. 2. Continuous control: Under this to maintain the reputation of business the franchiser controls regularly the activities of the business. 3. Assistance to franchisee: The franchiser helps the franchisee by way of providing training, technical help, advertising etc. 4. Separate business: Both parties business are separate from each other. 5. Periodical fees: A franchisee pays a fixed amount for a fixed period in consideration to the right. It may also be in some other form. 6. Minimum agreement fees: The minimum time period for franchise agreement is 5yrs and after each 5 yrs the agreement has to be renewed. The franchiser can also cancel the agreement with prior notice also. 7. Written agreements: The franchisee makes a written promise that he will not do any rival business during the franchisee contract.

Advantages of Franchisee business 1. Franchising requires less capital than other growth methods: Franchising permits your company to grow with capital invested by individual franchise owners. For the majority of Fran Source clients, the investment required to franchise their business is recouped through the sale of the first two to three franchises. 2. Rapid expansion: In today’s marketplace, the window of opportunity for a new or unique business concept closes very quickly. Franchising permits multiple units to be opened simultaneously, gaining a foothold over would-be competitors. 3. Market dominance: Multiple locations increase the company’s competitive advantage over similar type businesses. 4. Franchising puts a “business owner” in charge: Franchising ensures that qualified “managers” are operating additional locations rather than employees. A new business demands a great deal of time, effort and sacrifice. Franchisees are motivated by their ownership of the business and the capital they have invested. 5. Franchise locations may operate better and more profitably than “company owned” units: Once again, this is due to the fact that a highly motivated owner is running the business rather than an employee. With their capital at risk, franchisees are much more motivated then employees to perform at their highest levels. 6. Greater buying power: Franchisors that purchase products and services for their franchise network can often negotiate volume discounts from vendors and suppliers. Sharing a portion of the saving with franchisees provides higher operating margins and a competitive advantage over other similar businesses. 7. Increased name recognition: As additional locations are opened, name recognition increases. In the United States, customer loyalty towards recognized 1

BINAYAK ACADEMY, Gandhi Nagar 1st Line, Near NCC Office, Berhampur No: 9776486185, 8270407323 brands is at an all-time high. Consumers typically feel more secure frequenting a business they recognize by name. For the independent business person, it has become difficult to compete against companies that have significant resources to develop and promote their brand. Franchising permits an individual to benefit from the collective power and growth of the franchise network, which in turn leads to greater name recognition and competitive advantages for each individual franchisee. 8. Increased advertising and marketing budget: Franchisees may be required to contribute a percentage of their gross sales (or a set fee) to an advertising fund istered by the franchisor. This enables the franchisor to in regional and/or national media for the benefit of the franchise network.

Disadvantages of franchising Lack of independence  Inflexibility  Risk associated with the franchisors performance 1. Lack of independence An important feature of franchising is that every aspect of the business format is defined and each outlet is operated strictly in agreement with this format. Not everyone would be happy to operate a business under such constraints and you must consider how well you can accept this aspect of the franchising system when looking for a franchise to buy. a. Discipline: Buying (licensing) a franchise means working within a system in which there is little freedom or scope to be creative. Almost every aspect of operating the business is laid down in the manuals. b. Franchisor Monitoring: Regular field staff monitoring visits are welcome initially, but as time es you will feel able to do your own trouble-shooting and you may come to regard the franchisors interest as an intrusion - it is after all your business. c. Service Charges: At first these services are necessary and franchisees do not mind paying for them. However as time goes on, if less use is made of the franchisors services then franchisees can resent making the continuing payments. d. Reputation: Each franchisee affects the reputation of the whole system depending on their performance and ability. In many franchises there is a wide gulf in the quality of product or service between the best and the worst franchisees. Thus any franchisee can harm the reputation of all outlets in the chain, even internationally. 2. Inflexibility Responding to the market: Franchising tends to be an inflexible method of doing business as each franchisee is bound by the franchise contract to operate the business format in a certain way. This can make it difficult for a franchisor to introduce changes to the business format, refit outlets, or introduce new types of equipment. In some franchises it can be difficult for a franchisee to respond to new competition or to a change in the local market. The job itself: What may seem an attractive challenge now could become boring after a few years so it is important that you choose a franchise to buy in which you will enjoy the work, or which has potential for growth. 3. Risk associated with franchisor performance It is important to recognise that not all franchise businesses are soundly based or well run. In g the franchise agreement you are formally binding yourself to a particular franchisor and it is, therefore, vital to select one which is competent and ethical. 

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