A. Advantages from the Franchisor’s point of view:
Financial: Franchising creates another source of income for the franchisor, through payment of franchise fees, royalty & levies in addition to the possibility of sourcing private label products to franchisees. This capital injection provides an improved cash flow, a higher return on investment and higher profits. Other financial benefits that the franchisor enjoys are reduced operating, distribution and advertising costs. Of course that also means more allocated funds for research and development. Additionally, there will always be economies of scale with regard to purchasing power.
Operational: The franchisor can have a smaller central ...view middle of the document...
Business Format Franchising complete packages ensure a ready to go “turn-key” franchised unit.
Managing a small business whilst depending on the power of the franchisor company which has a bigger organization.
The franchisee has an opportunity to run a proven business concept with a successful operational track record.
The opportunity to learn the latest developments and changes in the local and global market from the franchisor and focus entirely on developing the sales revenues.
The benefit of operating under a recognized trade name/trademark, which can have better marketing results.
The franchisee has access to accumulated business experience and technical know-how in managing the business.
A unified store design which leverages the business reputation in marketing the concept.
Easier purchasing, storing, and product display systems.
C. Disadvantages from a Franchisor’s point of view:
Considerable capital allocation is required to build the franchise infrastructure and pilot operation. At the beginning of the franchise program, the franchisor is...