A business will have two or more options at its establishment to get the premises within which it will operate. It can build or hire a premise, but it can also franchise. Franchising is a strategy by which a business gets a premise by buying and not building or hiring. In franchising thus, the business purchases a building that is already complete and starts operating in it immediately. This is for different reasons.

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Franchising is becoming popular in the acquisition of business premises. There are many reasons for the high rates of franchising experienced in many economies. Many businesses are extending their operations by franchising and this is done on many grounds. There are various reasons to justify franchising albeit the challenges.

The building of new premises for business is time consuming. The time taken for legalization procedures in the acquisition of land is rather long. There are many bureaucratic steps to be followed pegged on law. Franchising however solves this problem. In franchising, a business does not have to undergo through all the processes of land acquisition for the construction to take place what happens is simply property exchange and business starts. The time wasted between land acquisition and completion of construction for business to commence is used in business operation and this earns the business more profits.

The current global costs of construction are generally on the increase. This is because many world economies are faced with inflation. This raises the cost of construction by raising the cost of labor and raw materials. This means that it would be cheaper to acquire a building through purchase than construction, franchising in other words. Any business aims at reducing risks that will lead to losses and high costs of constructions is an example of such risks. What a business needs to do in franchising is simply to identify an environment suitable for it and identify a building that suits it, purchase it and start its operations.

However, the main disadvantage of franchising lies in the fact that since building costs are on the verge, the cost of purchasing business premises is also rising. Those who want to sell their premises are aware of the current market trends and tend to adjust their prices alongside this trend. Cost factor is therefore more of a theoretical or imagined advantage which may not occur in practice. In fact, with franchising, the business may even spend more because people who invest in real estate for franchising purposes tend to sell their houses or premises at very exorbitant prices. In such cases, the business would spend a lot of money in franchising this kind of an enterprise.

Franchising is generally observed to be on the increase with many businesses going for it in stead of building houses for their operations. Franchising as we have seen helps business start its operations within a very short time and this means the business stabilizes very first with franchising. However, in some cases the business may force to go for housing in an environment that is not favorable because the business had to compromise. Furthermore, there is the problem of increasing costs of franchising due to the global increase in costs of construction, with inflation to largely blame. All in all, many firms still franchise.