Part Seven - Pros And Cons Of Franchising Model

PART SEVEN (Pros and Cons Of Franchising Model)

What is Franchising?
Franchising is a method of doing business wherein a "franchisor" authorizes proven methods of doing business to a "franchisee" for a fee and a percentage of sales or profits.
Is Franchising for you?

Who belongs in this category?
Any type of a Franchise Owner (“franchisee”) if you are not a Franchisor
Do you have what it takes to be a Franchise Owner?

“ Franchising” Pros Franchise Leverage: Yes Franchisor’s Model Franchisor’s Success Franchisor’s Training

“ Franchising” Cons Franchise Control: No Customer Base: Limited Startup Costs: High Carrying Costs: High Scale- ability: No Growth Potential: Limited Replic- ability: No Multiple Income Streams: No Profit- ability: Limited

Level of Effectiveness
Pros: 1
Cons: 9
Level of Effectiveness = 10% Franchise Leverage: Yes Franchisor’s Model Franchisor’s Success Franchisor’s Training Franchise Control: No Customer Base: Limited Startup Costs: High Carrying Costs: High Scale- ability: No Growth Potential: Limited Replic- ability: No Multiple Income Streams: No Profit- ability: Limited

Analysis
Franchising Facts:
Franchise is a legal and commercial relationship between the owner of a trademark, service mark, brand name, or advertising symbol (the franchisor) and an individual or organization (the franchisee) wishing to use that identification in a business.
The franchise governs the method of conducting business between the two parties.
Generally, a franchisee sells goods or services supplied by the franchisor or that meet the franchisor's quality standards.

Analysis
Advantages of Franchising:
Established Brand and Customer Base
Marketing Support
Business Support
Training Support
Access to Proprietary Methods
Reduced Risk

Analysis
Disadvantages of Franchising:
Initial Payout
Royalty Payments
Marketing/Advertising Fees
Limited Creativity/Flexibility
Sole Sourcing
Long-Term Contract
Dependent on Franchisor Success and Reputation
False Expectations

Quote
“ Why would anybody go out and spend $50,000 on a franchise to makes whatever when you can just start a business with no capital out of pocket and way more scalable ?”
– Brad Fallon, a Co-founder of StomperNet

Takeaways
“ If you are a real entrepreneur – then franchising may not be for you. Real Entrepreneurs don’t own franchises – they choose their own path to success.
All franchises are “screening out” entrepreneurs because they don’t want them to mess with existing model.” – Rich Schefren

Where do you go from here?

CLICK HERE TO GO TO
PART EIGHT

Part Seven - Pros And Cons Of Franchising Model

by Val Slastnikov on Mar 02, 2009

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Part Seven - Pros And Cons Of Franchising Model — Presentation Transcript