Question

 Explain the advantages of franchising, both for the franchisor and franchisee.

Answer 1

 Merits of Franchising:

1.  Proven idea: Business is based on a proven idea. Success of the product can be checked in the market.
2. Profit from brand recognition:Franchises develop an image in the marketplace. This saves both time and money of advertising, promotion, recognition, etc. Image of the product is a favourable one and is in the minds of consumers.
3. Recognized brand name and trademarks: Entrepreneur gets a recognized brand name and trademarks. Benefit from any advertising or promotion by the parent company automatically benefits the franchise.
4. Support from parent company: The franchisor gives support in the form of training, help setting up the business, a manual telling how to run the business and ongoing advice.
5. Exclusive rights of the territory: The franchisor can’t sell any other franchises in the same territory which leads to the creation of monopoly power in the territory.
6. Easier Financing: Financing the business becomes easier due to the associated brand name. Banks are more likely to lend money to buy a franchise with a good reputation.