This is the earliest type of franchising.
Under this, dealers were given the right to distribute goods for a manufacturer. For this right, the dealer pays a fee for the right to sell the trademarked goods of the producer.
Franchising Your Business - Pros and Cons - Advantages and Disadvantages
Product franchising was used, perhaps for the first time, by the Singer Corporation during the s to distribute its sewing machines. This practice subsequently became popular in the petroleum and automobile industries also.
Under this arrangement, the franchisor manufacturer gives the dealer bottler the exclusive right to produce and distribute the product in a particular area. This type of franchising is commonly used in the soft-drink industry. This is recent type of franchising and is the most popular one at present.
This is the type that most people today mean when they use the term franchising. In the United States, this form accounts for nearly three-fourth of all franchised outlets. Business-format franchising is an arrangement under which the franchisor offers a wide range of services to the franchisee, including marketing, advertising, strategic planning, training, production of operations manuals and standards and quality — control guidance.
What are the advantages and disadvantages of franchising?
Such franchising involves a system in which a franchisor gives license to the franchisee to sell the specific products under the trademark and brand name of the franchisor. This type of franchising is commonly used to market automobiles such as Chevrolet , soft-drinks such as Coca-Cola and appliances.
Such type of franchising is common among fast-food restaurants such as McDonalds hotels, educational institutions such as Delhi Public School, DPS , and many others. Franchising is an old concept in use for long time in the business world.
Owning a Franchise Can Be a Shortcut to Success
Some trace out the history of franchising dating back to the mid-nineteenth century when Isaac Singer decided to improve the distribution of his sewing machines, i.
Franchising arrangement is a symbiotic one for the franchisor and the franchisee, nonetheless franchising is particularly beneficial for the franchisee. Following are, for example, the distinct advantages that franchising provides to the franchisee:. Hence, buying a franchise is so far safer than trying to start a business.
Here, what is significant to mention is that fewer than 10 per cent of all franchise fail.
In dramatic contrast with this is the fact that two out of every five entrepreneurs who start on their own fail within three years, and eight out of every ten fail within ten years. Many new businesses experience lean months, or years, after start-up. Obviously, the longer the period the business must experience it, the greater the chances of failure.
how the pieces of a business fit together
With the well-tested franchise, this period of agony may reduce to only weeks, or perhaps just days. Because, being part of a large and that too proprietor organization means paying less for a variety of things such as supplies equipment, inventory, services, insurance, and so on.
It also can mean getting better service from suppliers because of the importance of the organisation franchisor of you franchisee is part. In-spite of above benefits, franchising is not an unmixed blessing. There are some disadvantages as well associated with a franchise arrangement.
The purpose of these restrictions is not to frustrate the franchisees, but to ensure that each outlet is rim in a uniform, correct manner.
Buy a franchise
Restrictions may relate to remain confined to product line or a particular geographical location only. Many franchisees become vulnerable to this option. As such, they operate under the constant fear of, non-renewal of the franchise arrangement. Then, a question arises is that do these disadvantages mean that franchising is no longer a desirable way to go into small business?
Certainly not. Franchising is a proven and complete business concept world-wide. In fact, what do they really mean is that the security that some people associate with franchising is an illusion? Hard work, realistic expectations, and very careful investigation are required if becoming a franchisee is to be a successful and satisfying experience.
This underlines the need for a perspicacious evaluation of a franchising arrangement. This is discussed subsequently. You must be logged in to post a comment. E-Commerce Suitability for Small Enterprises.
Speech on Franchising: Definition and Characteristics.
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