Premium Essay

Franchise Business

In: Business and Management

Submitted By ryan97
Words 809
Pages 4
Lower Cost
Unlike employees, franchisees make an initial payment in return for becoming a part of your business and then they continue to pay you a percentage of their revenue, throughout the duration of their Franchise Agreement. This means that the costs of setting up the franchise, training staff and launching the business are all covered by the franchisee rather than by the parent organisation. Similarly, once the business is up and running, it is the franchisee who will be rewarding you with a monthly income, rather than being paid by you as an employee. For these reasons, the franchise system can provide a very cost-effective route for business development, but only provided that the original business is successful and that the franchisor is willing to invest sufficient time and money into creating an attractive franchise opportunity.

Simpler Management
Franchisees are themselves responsible for the day-to-day running of their business units and they must do this strictly in accordance with the Franchise Agreement and Operating Manual. As franchisees have invested their own hard-earned money, they do not require the detailed level of management which would be needed for employees. The objectives of the franchisee and of the franchising organisation are, therefore, very closely aligned, with the success of the one depending to a great extent on the success of the other. As a result, the franchise network requires only a simplified and relatively low-cost management system. This is typically based on the close monitoring by the franchisor of the key performance indicators (KPIs) and the provision of motivational leadership.

Faster Expansion
The benefit of self-financing business units and a simplified management structure as described above usually means that franchised networks can be expanded more quickly than company-run networks. Franchising is all

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