The most common franchising companies known to the public would be chaining of food stores like McDonald’s which nowadays offers some franchising strategies to reach a wider consumer market. McDonald’s has become a household name since it was able to reach a wider consumer market that is not only limited to the United States and the Americas but to the rest of the world. The success behind McDonald’s becoming a household name and one of the most known trademarks around the world is due to the system of franchising. Aside from the buildings that McDonald’s rent to the franchisee, it also has a stake in the sales of the franchise and the cost of the supplies charged to the franchisee. To help out in the quality of products and services offered in each food chain, McDonald’s sends a member from the franchisee to their Hamburger University in Oak Brook, Illinois. This is one support benefit that the franchisee would get once they franchise a restaurant for McDonald’s.
Like any business, there are advantages and disadvantages that franchising offers to anyone who wishes to venture into it.
Popular labels are widely known and are likely to sell. Popular trademarks like McDonald’s are likely to sell than a new restaurant that has not reached a market such as McDonald’s. It is selling a well-known product to a consumer market that knows the product being sold.
No need to develop a new product that has not been well researched. Venturing into franchising would allow the franchisee to have access to information that the franchiser has about an existing product and put up a business in a shorter period of time.
Trainings and seminars would be provided to the franchisee about the product. It would be easier to operate and manage the business since there are available trainings and other support methods for the franchisee.
High standards held by the franchiser raise costs of maintenance in the franchise. Since the standards of the franchiser would definitely be high, sometimes the cost of maintaining a franchise can escalate. Unless the materials used would be second rate and low in cost.
The development of new products might still need to be passed for approval to the franchiser. If the franchisee would like to add a product which they think would be salable in their market range, the new product has to be approved first by the franchiser and this may take time, and it would likely be rejected if it does not meet the standards of the trademark.
Profit is limited since the franchiser has a stake, most of the time, on the profits of the franchise. Not only does the franchisee have little control of the franchise due to the many stakes that the franchiser has on the franchise, but the profit of the franchise would also be split between the two. Therefore, there is a limit to how much the franchise would earn.
Even if there are several disadvantages to franchising, still there are advantages. If you think you could handle this kind of business, all I can say is, business is gambling. In any industry there are players, and you might be lucky that you would be on top once and sometimes at the bottom. Get to know the gameplay and start playing to win the game.