The pros and cons of franchising your business entrepreneur. If you are a business owner, you may want to license the use of your brand or. Franchising meaning, advantages, disadvantages it brings together the titleholder of recognized merchandise with another business. It is a more affordable method of stepping into international business as the licensors or franchisers dont need to pour too many. In a franchising agreement, royalties might be paid weekly out of the. Licensing and franchising offer several advantages and disadvantages to organizations seeking to expand their reach outside of their domestic borders, the perspective of this paper is from an. It is a more affordable method of stepping into international business as the. There are advantages and disadvantages to licensing for both parties to. The advantages and disadvantages of franchising in france. There are a lot of advantages and disadvantages of franchising business, lets have look. A license is a legal contract authorizing one business to use the. A license allows the licensee to use, make and sell an idea, design, name or logo for a fee. Advantages of foreign licensing so what are the advantages of using a foreign licensing agreement. If you do choose to embark on the franchising route.
A franchisor expands his business through franchising as it offers certain. As well as the initial costs of buying the franchise, you pay continuing management service. Advantages and disadvantages of franchising and licensing. Franchising, licensing, contract manufacturing pros and cons. International franchising advantages and disadvantages.
Understand the pros and cons of patent licensing, including potential risks for both patent holder and licensees. Advantages and disadvantages of franchising how and what. High cost the costs of purchasing a franchise can be. If you want to franchise your business so if you are a successful business owner and you want to expand then naturally franchising is an option. Franchising is an advanced form of licensing in which the focal firm, the franchisor, allows an. Franchising us department of commerce defines franchising according to the federal trade commission rule ftc 436 as. Advantages and disadvantages of franchising free essay example. This allows one to leverage on the advantages of being a franchisee whilst overcoming some of the disadvantages associated with it citation hun11 l 1033 hunter, 2011. Advantages and disadvantages to franchising your business. Franchising meaning, examples, advantages, disadvantages. Important on franchise vs licensing advantages disadvantages.
Advantages and disadvantages of franchising advantages to franchisors. Licensing requires very little capital outlay making it an accessible channel even to small companies and it should provide a high rate of return on the capital invested. Franchising is an efficient means of distributing goods and services. The franchisor does not incur the cost of developing branch locations that is the responsibility of the. Before we start talking about advantages and disadvantages of franchising, let us first look into the definitions of franchising. Franchising and licensing, however provide an attractive alternative for companies to grow market share and revenue without the extraordinary capital expenditures. This strategy can be opted by small businesses by having a brand name of a wellknown company associated with it. Advantages to the franchisor include the opportunity to expand its business without investing much of its own money. We are reading the advantages of franchising and the first. Licensing and franchising share a few similar advantages. There are numerous advantages in entering into a licensing agreement with a.
You can switch careers easily when changing industries, which is now commonplace for most entrepreneurs. Any new franchise you sell will start giving you profit as you have already build trust among your customers. If you are the owner of an intellectual property, then licensing it is an opportunity to create. Advantages and disadvantages if you buy a franchise, you get all the advantages of remaining selfemployed, but you mitigate the risks by being part of a proven. Offsetting these positives are three major disadvantages of the franchising business model. Franchising is a business strategy and a specific marketing strategy that involves a business organization or franchisor licensing its business model, operational procedures, and. Before getting involved in franchising in ny or nj, it is important to understand some of the advantages and disadvantages to being a franchisor and franchisee. Lets take a look at some important benefits for a company like megans.
The first advantage of franchising your business is that you already got loyal customers and fame. For small business who cannot afford for much finance and capital investment for a business startup, franchising will be beneficial. Franchises have benefits, proven ideas and brand names but the franchisor may restrict how you run the business. Licensing is a milliondollar retail market worldwide.
Franchising refers to the granting of the right by a parent. It is a more affordable method of stepping into international business as the licensors or franchisers dont need to pour too many funds abroad. However, they enjoy a lot more freedom than franchisees. Advantages of international franchising franchising is a unique form of business arrangement.
Franchising allows aspiring entrepreneurs to start a new business without incurring the same level of risk as a brandnew venture. Advantages and disadvantages of business franchising. Under franchising, the service provider develops the business format and licenses it to others. Describe three advantages and three disadvantages of franchising for the franchisee.
Listed below are some advantages and disadvantages of buying a franchise. A licensing agreement grants another company the right to manufacture andor sell goods, apply a brand name or trademark, or use. The benefits of franchising are similar to that of licensing. The franchisor receives franchise fees and royalties along with the. Franchising holds the same advantages as licensing and creates the opportunity for revenue to be earned from a product that cannot be patented. The level of risk of the licensor is low because there is zero or next to zero investment is involved. In fact, both have other people marketing your product or service for you, and you are earning money while theyre doing it.
Some of the advantages to franchising your business include. Advantages and disadvantages about the author with features published by media such as business. The relation between franchise vs licensing advantages disadvantages for a corporation as well as the company appears to get bigger, franchising as well as licensing are regularly engaging business and. If you dont have the money to manufacture or sell your own product, or you. Franchising is a specialized form of licensing in which the franchiser not only sells an intangible property to the franchise but also insists the franchise agree to abide by strict rules as to how it does business. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor. Your franchise will benefit from the collective buying power of the parent company, which passes on the savings to franchisees. Both licensing and franchising allow you to increase income through multiple revenue streams at relatively little cost to you. The advantages and disadvantages of franchising join. The franchisee gains control over operations in exchange for some type of. Ive decided to list the disadvantages first, to in. This allows you to enter other markets and gain exposure that you may not otherwise get.
Licensing, franchising, and other contractual strategies. The franchise agreement usually includes restrictions on how you can run the. Weighing the advantages and disadvantages of franchising, as outlined above, will hopefully help you determine if franchising is the right path for you. What are the advantages and disadvantages of licensing.
Franchising is an ongoing business relationship between. Firstly, franchising is a great way to expand a business without incurring additional costs on expansion. Capitalized expansion expansion requires the investment of capital and resources that for many successful business owners is limited and sometimes difficult to raise. There are numerous advantages in entering into a licensing agreement with a foreign national. It brings together the titleholder of recognized merchandise with another business. Thus, inventory and supplies cost less for a franchise than for. Business growth advantages and disadvantages to franchising your business each franchise agreement requires franchisees to use the name, branding, recipes and practices of the franchisor. Advantages and disadvantages of buying a franchise. The appeal of a business format franchise is understandable. The original company called the franchisor enters into a contract with a second business called the. Following are the 15 advantages and disadvantages of franchising your business franchisor s perspective. Advantages and disadvantages of franchising profolus. Franchises offer the independence of small business ownership supported by the benefits.
Advantages and disadvantages of franchising qs study. Franchising serves as a source for the capitalized expansion of a successful business. This strategy can be opted by small businesses by having a brand. Licensees also enjoy lowered risk because theyre usually entering the marketplace with a known quantity and a builtin customer base. Franchising is an ideal way to grow your established business. Advantages and disadvantages of licensing patents nibusinessinfo. What are some advantages and disadvantages of franchising. Running your own business is a cornerstone of the american dream. A franchiser also enjoys a greater degree of control over the. Advantages and disadvantages of licensing patents patents are a big capital investment for small or startup businesses. Important on franchise vs licensing agreement example.
Licensing and franchising can be done both as a business owner and as someone looking to enter a specific market. The advantages and disadvantages vary depending on. But it is always a good idea to learn about and understand the advantages and. Licensing arrangements the pros and cons tcii strategic and. Advantages and disadvantages of franchising term paper. In franchising the capital needed to expand the business is provided by the franchisee. Advantages and disadvantages of franchising and licensing advantages.