International Franchising Advantages and disadvantages

International Franchising Advantages and disadvantages

Franchising at international markets come with their own pros and cons. A few of them are mentioned below:

Advantages: –

I) Minimum Risk – The minimum risk refers to since the franchise has already been set up in the home country and has been performing well, it is likely to perform well in a foreign location as well. The franchise business is time-tested and with a proven business model, which reduces risk to a larger extent.

II) Competitive Edge – This refers to the brand having a competitive edge over others as the brand already has a time-tested model in place. The brand is known nationally and internationally. It is a set business market and may now have to spend a lot of money on marketing the brand at a foreign location.

III) Guidance and Support – The franchisor is usually seen giving all the necessary guidance and support to the franchisee in order to help them explore the international markets and set up their franchise.

IV) Previous Experience is Not Needed – It is really not important of the franchisee to have any previous knowledge, as the franchisor will provide with all the needed guidance and support to establish the brand internationally.

V) Sole Territory – This refers to when the franchisor gives the right to the franchisee to establish the brand solely, no other franchisee is given permission to start a franchise there.

Disadvantages: –

I) Lack of Independence – This is one of the largest drawbacks of franchising, the franchisee is bound to adhere to the pre-defined/ mentioned rules and regulations of the franchise business. The lack of independence also includes:

II) Restrictive – As mentioned there are a lot go restrictions from the franchisor on to the franchisee. The franchisee is bound to run the franchise on the will and wish of the franchisor. The franchisee can only suggest changes but it is on the franchisor to take it up or leave it.

III) Franchisor Monitoring – Though franchise monitoring is good at the initial stages of franchise, after a point of time it turns out to be a problem for the franchisee. For the fact that the franchisor has to be contacted for every change made in the business and approval is needed for the same.

IV) Re-selling – If the franchisor is not easy and wishes to sell the franchise, it is hard for him/her to do the same as the franchisor is to be suggested and only after he/she approves it, it is then the franchise could be transferred.

V) Share in Profits – The franchisee for a long time will have to keep on paying the franchisor a part of the sales as royalty, they make at the franchise. Which could be in large amounts than the profits the franchisee will receive in return.

Nevertheless, every form of business has its pros and cons attached to it, but franchise is still one of the best ways to start a business in any given segment.