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What is Franchising?
Franchising is basically a business strategy of attaining and keeping customers. It is a marketing mechanism for constructing an image in the minds of present and upcoming clients about the ways in which the products and services of the company can assist them. It is a way for distributing products and services that can satisfy the requirements of the customers.
Franchising is one of the most incredible small business investment opportunities in the industrial field today if it is executed perfectly. For the people who are wishing to move upwards into the middle classes, it is the chance for creating wealth through the ownership of their own business. For today’s generation, it is the chance to attain a good job, attain good experience in the workplace and have earned money. For elder or the ones who have had much experience, this is the chance to upgrade their management skills and learn enough to initiate their own business. For the customers, it is the surety that when they will take decisions about their purchasing, they can do it with complete confidence.
So, with this article learn all about the basics of franchising. So, let’s jump upon the major factors of franchising.
Types of Franchising
Franchising basically is classified into three types, the first being product franchising, second being manufacturing franchising and the last but not the lease, business-format franchising. Lets know about them in a little detail.
1. Product Franchising
This is the firstly invented type of franchising. Under this category, the dealers were provided with the authority to distribute goods for a manufacturer. For this, the dealer will have to pay some fee for selling the trademarked goods of the producer. This type was firstly used to distribute sewing machines. And, this became major in the automobile and petroleum fields also.
2. Manufacturing Franchising
Under this category, the manufacturer that is the franchisor provides the dealer the sole authority to produce and distribute the product in a specific field. This kind of franchising is most commonly utilized in the soft-drink area.
3. Business-format Franchising
This type is one of the most famous franchise business ideas during the current times. In today’s time when people use the word franchising, then this type is what they mean. It is a positioning in which the franchisor provides a vast range of services to the franchisee, which involves advertising, marketing, making strategies, keeping a check upon the qualities and multiple more things.
Advantages of Franchising
Here are some of the basic advantages that one attains through franchising:
• Franchising makes the task of initialization very accessible because the franchisee attains a business format that is already tested in the market and is a proven system. Therefore, purchasing a franchise is way much better than willing to initiate a business.
• Franchising decreases the chances of failure. The important thing to mention here is that lesser than the 10 percent of all the franchise faces failure. In great contrast with this is the fact that two amongst five entrepreneurs who initiate their own business fail under 3 years and around eight amongst of every ten faces failure under ten years.
• A well settled franchise brings with it the vitality of recognition. Multiple new ventures experience some off months, or even years after staring their own start up. Very clearly, the longer the period the venture must face it, the more the chances of failure are there. With the well implemented franchise, this period of pain might decrease to only weeks or a few days.
• An online franchise businessalso has the capability to increase the purchasing power of the franchisee also. As, being a part of big and especially of a proprietor company means paying very less for multiple things like insurance, services, inventory and things like these. It also states, attaining good service from the suppliers due to the vitality of the organisation that you are a part of.
• You can attain the advantage of the franchisor’s research and development in bettering the product.
Disadvantages of Franchising
After the advantages, let’s hop on to some of the disadvantages offered by franchising:
• Dissimilar to the entrepreneurs who start their own business, the franchisees do not get the scope for exploring their own creativity specifically in the case of pure franchising. They will always have to work according to a particular business format provided by the franchisor.
• The franchisees normally does not have the authority to sell their business off to the one with the highest bid or leave it upon any other family member without the permission of the franchisor.
• The franchisee has the right to build goodwill and they can build all of it they want for their business by their efforts, but the goodwill will still belong to the property of the franchisor.
Final Words
In the business world, it is very important to keep up with the pace and franchising is running at a very great speed at this moment. It is vital for every business owner out there and there is no doubt in the fact that everything important comes with both advantages and disadvantages. So, if you are interested in this area, this article will provide you with the basic and important insights about the best franchise business.