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An overview of franchising, and its pros and cons


Provided by Potential.com, Content Partner for SME Toolkit UAE

 

“Franchising” is a form of business where the Franchisor, who owns a trademark, good and/or service, authorizes the Franchisee to invest, market and/or distribute this trademark, good and/or service, for a specific period of time, in exchange for a specified payment structure.


So how can you determine whether franchising is right for you or not?

 

Have a thorough grasp of the benefits of franchising: 1) using a readily available, reputable, and reliable trademark, good, and/or service, 2) adopting a proven operating system, 3) abiding by defined quality standards, while enjoying a certain level of independence, 4) gaining from the economies of scales, customer and market awareness, 5) providing extensive trainings to help the Franchisee work on the business; not in it, and, 6) providing field support specialists to help keep the Franchisee on track.

 

Be aware of the drawbacks of franchising as well: 1) relying on the Franchisor, 2) placing a number of burdensome operational restrictions on the Franchisee; including limitations on products, pricing, employee performance & policies, territory, marketing, etc., 3) becoming negatively affected by the Franchisor’s reputation or un-sustainability, and, 4) incurring  additional unforeseen fees.

 

Ensure nurturing the following personality traits: resilience, innovation, consistency, ethics, optimism, hard work, respect, openness to new ideas, entrepreneurial thinking, reliability, leadership, management, delegation, wisdom, presence of mind & speed of learning, effective communication, risk-taking, flexibility, patience, and persistence.

 

Understand the basic elements of a franchise agreement: business operating system, brand exclusivity & intellectual property, territories, premises, equipment, & supplies, training & operational support, the initial duration of the agreement & renewal options, fees & payments, Franchisor & Franchisee legal obligations, and dispute resolution & termination terms.

 

Franchising is a strategic alliance amongst groups of people, who have specific relationships and responsibilities, with a joint goal to dominate markets!

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