BA336 Human Factors in Small Businesses
Case study for
The Appeal of Franchising
From this case we can know franchisees also benefit from the franchisor’s business experience. In fact, experience is, in essence, what a franchisee buys from a franchisor. Franchising can be the ideal path to owning a business for people in almost any phase of professional life, whether they are retirees looking for a new direction and extra income or recent college graduates who are ready to embark on exciting careers. “Boosted by a brand name, training, advertising, and an established business plan, a franchise can ease the struggle and the risk of opening a business and still let you call some shots.
Investing in a franchise means that rather than staring your business entirely from scratch, you pay a franchise fee ...view middle of the document...
This means that even if you are successful, you may constantly be giving up a piece of the pie. Ongoing fees are generally based on shared benefit from marketing efforts of the franchisor.
Ironically, one drawback of investing in a franchise is the lack of control you have over decisions made that might tarnish the brand's image. Customers typically don't disassociate franchisees from the company brand. Thus, your business loses value in these situations even if you operate in an ethical, effective way.
If you want to have complete reign over the way you conduct business, a franchise is most often not the way to go. Franchisors typically have long legal documents outlining requirements that you follow certain operational standards, or risk penalty or revocation of your privileges. For entrepreneurial-minded business owners, this is a tough pill to swallow.
As a franchised business owner, you face a greater deal of scrutiny than an independent business owner with no one to answer to. You may also be required or pressured into participating in promotional campaigns or events that you wouldn't get involved with as an independent business owner.
Before you invest in a particular franchise, you should carefully consider some very important factors, such as your skills, financial capabilities and goals. The following list highlights some of the important considerations you should keep in mind. This list is meant to be a starting point to help you make an informed decision, and is by no means exhaustive.
A. Know your skills, capabilities and goals
B. Know your industry
C. Know your franchisor
D. Questions to ask existing and former franchisees
E. Watch out for fraud: tips and warning signs including:
* Failure of the franchisor to disclose all necessary
* Documents and details.
* The use of high-pressure sales tactics.
* Franchisor claims of minimal risk and promises of unrealistic profits.
* The charging of unjustified start-up fees.
* Consult your professional advisors.