Advantages and Limitations of Potential Franchisees - Essay Example

The concept of retailing a wide variety of products and services has opened a huge vista of opportunities for expanding one’s business in areas that were once inaccessible and beyond the imagination. 

The major advantages are that a franchisee can establish and operate a well-established business in a new area where the whole marketing system inputs and guidelines are provided by the franchisor continuously. The franchisee can start a business with a relatively small icanestmenta that has prospects of good return with immediate effects. The recurrent train returns proved marketing strategies provided by the franchisor boost the confidence of the franchisee and help him to expand his business significantly.

The main limitations are the loss of independence in running the business as one wants and restriction in the operational area comprising mainly of the goods and services that can be sold in specific areas. Other conditions like the restrictions on the resale of franchisee rights and the individual advertising efforts are hurdles that restrict the further scope for the franchisee. Advantages and limitations of potential franchisors The main advantages of franchisors are that they can expand their business and spread them in wider areas of operation in a relatively short time and with reduced capital cost.

By facilitating goods and services to the franchisee, the franchisor is relieved of the pressures of the day-to-day operations and therefore is better able to focus day his core business and develop network activities and franchisee support programs and strategies. The major aspect is that he can control the appearance and operation of the franchisee outlets as per his standards, thereby helping maintain the credibility and high standard of his brands. 

Though the profit margins are considerably reduced the widening network of the franchisee, selected judiciously, helps increase the overall profit with considerably less stress. Another major limitation is that expanding to foreign locations may entail more ‘strain on the franchisor’s resources’ (article, Jan 2008) and make it difficult to impose some of its terms and conditions, thereby, comprising its market strategies and training programs. ‘The franchisor must ensure compliance with laws, customs and business practices of the target country’ (article, Jan 2008).