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Answer :
Franchising is an option for new venture expansion strategy for entrepreneurs. Franchising involves the licensing of a successful business model and brand to another person or group, who then operates their own version of the business under the franchisor's guidance and support.
The advantages of franchising for the franchisor include:
Expansion and Growth: Franchising can be a quick way to expand a business without the need for large amounts of capital.
Limited Liability: Franchisees are responsible for operating their own businesses, so the franchisor has limited liability.
Consistency: Franchisors can ensure that all franchisees follow established processes and procedures, leading to consistency in customer experience.
Additional Revenue Streams: Franchisors can generate additional revenue streams from franchise fees, royalties, and other charges.
The advantages of franchising for the franchisee include:
Established Business Model: Franchisees benefit from an established business model that has been proven successful.
Training and Support: Franchisees receive training and ongoing support from the franchisor, which can be beneficial for those new to business ownership.
Reduced Risk: Franchisees may have reduced risk compared to starting a completely new business from scratch.
Brand Recognition: Franchisees have the advantage of using an established brand with existing customer recognition.
The disadvantages of franchising for the franchisor include:
Loss of Control: Franchisors may relinquish some control over how their brand is operated by franchisees.
Legal Obligations: Franchisors have legal obligations to provide support to franchisees and may be held liable if they fail to do so.
High Initial Investment: Setting up a franchise system can require a significant initial investment.
Shared Profits: Franchisors often share profits with franchisees.
The disadvantages of franchising for the franchisee include:
Cost: Franchisees may need to pay significant fees, such as upfront franchise fees and ongoing royalties.
Limited Autonomy: Franchisees may have limited autonomy in how they operate their businesses under the guidance of the franchisor.
Contractual Obligations: Franchisees often have contractual obligations to follow specific procedures and may be restricted from making certain decisions independently.
Dependence on the Franchisor: Franchisees may depend on the franchisor for ongoing support and guidance.
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