Advantages and Disadvantages of Franchising From a Franchisor's Perspective - Checklist
Drafting notes
This Checklist considers the advantages and disadvantages of a franchising business model from the franchisor's perspective. There is regular interest in franchising as a business model however potential franchisors should consider whether it is right for their particular business. A list of advantages and disadvantages of franchising are set out below from the franchisor's perspective.
Advantages
Checklist | Notes |
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Franchising is a popular model for business expansion and as such there are a number of high profile examples of successful franchises such as pizza chains, hotels and mobile phone stores. | |
Many of the high street banks offer generous lending terms to franchised businesses because they are viewed as less risky than other business models. | |
The franchise model requires considerably fewer employees than if the business network were owned by a single entity. This is because there is no need for the owner to open and manage a number of branches. | |
The franchisor will often use the franchisee's franchise fee to expand the business and reduce its debt. The franchise fee is an important revenue stream for a franchisor because it is annual and certain. In some circumstances the aggregate of the fees can fund operational costs. |