Answering questions based on the case study - Essay Example

n business model, franchisees are provided with ample start-up support and training by the franchisor and the company maintains an established brand (Ramirez-Hurtado and Quattrociocchi 2009). From the Snap Fitness’ perspective, there is significant cost savings by having an independent investor take on the franchise. It spares the franchisor of the expenses of rentals or new facilities construction as well as the necessary labour needed to manage the business and provide services. Yet another advantage is that this gives the franchisor rather simplistic revenue production and royalties.

The franchise contract indicates a level of profit sharing, usually between three and seven percent, without much commitment and service delivery by Snap Fitness. Therefore, costs are reduced in managerial labour whilst also giving the franchisor earnings simply as a basis of contract. A final advantage to this strategy is having access to more ideas. The contracted relationship with the franchisor and franchisee can create better strategic decision-making by combining talents and knowledge held by the franchisee.

Usually these investors have business experience or management talents that are vital for improving problem-solving and responding more effectively to market conditions. Challenges of franchising include a loss of control over the franchisee. Monitoring management is a significant strategic challenge in business and franchisors cannot always be present to ensure managers are being productive. This is an agency problem of executive control (Brickley and Dark 1987). Additionally, not all franchisees maintain the same level of business talents and experiences which could conflict ensuring that the franchisee is adhering to the established model of management and leadership necessary to be consistent with the company’s brand ideology and service philosophy.

Yet another challenge is that Snap Fitness could experience tensions and conflict with the franchisee. The