Get premium membership and access questions with answers, video lessons as well as revision papers.
Disadvantages of franchising.
Higher legal expenses
The necessity of preparing agreements, and related documents, and filing them in various states (with attached audited financials) represents a significant expense, although the year-to-year expenses are generally less than those initially incurred in setting up the structure and related documents. Additional legal (and possibly accounting) costs will be incurred if a separate legal entity is used for the franchising program.
Regulation of the relationship
Franchise laws are particularly technical in their application (for example, if a Franchiser provides only 9 days of pre-sale disclosure rather than the required 10, the Franchisee has an automatic rescission right, even though the missing day was not the cause of any loss.
Technical constraints
Franchise laws in a number of states regulate the circumstances in which a Franchiser may terminate or refuse to renew a franchise. While generally not preventing Franchisers from achieving termination or non-renewal, these laws do present a number of technical requirements that must be complied with.
Franchising marketing constraints
Advertisements, brochures, flip charts, video tapes, etc. offering the franchise (but not retail advertisements) must be pre-cleared with state agencies and cannot contain earnings claims.
Control issues
As with dealerships, there may be quality control and related issues, at least as compared to company-owned operations.
Business relationship issues
Perhaps more than with dealers, Franchisees typically view themselves as, to some degree, partners with the Franchiser in the development and possible success of the system. While most will agree that committee management doesn't work and that there needs to be ?one captain for the ship a wise Franchiser will work with his Franchisees, probably with the help of a franchise advisory council, in charting strategic directions, implementing marketing plans, etc. A Franchiser must be psychologically comfortable working with Franchisees who will understandably take the view that ?if we‘re going to be in on the landing, we‘d like to be in on the takeoff too.
Potential loss of freedom
Unless carefully designed, awards of ?exclusive territories may generate legal and other problems when a Franchiser seeks to expand through alternative channels of distribution (Internet, mail order, etc.), co-branding opportunities, mergers with existing competitive chains, etc. Appropriate franchise agreement provisions, and prop education of Franchisees, and management of their expectations, can largely avoid these issues.
marto answered the question on January 30, 2019 at 10:52
- Outline four reasons why it is important for an entrepreneur to have good organization structure in the enterprise. (Solved)
Outline four reasons why it is important for an entrepreneur to have good organization structure in the enterprise.
Date posted: January 30, 2019. Answers (1)
- In the recent past, the prices of basic commodities have been on an upward trend party due to the global recession and social unrest in...(Solved)
In the recent past, the prices of basic commodities have been on an upward trend party due to the global recession and social unrest in some oil producing Middle East countries. In relation to the above statement, identify four negative effects of the uncontrollable upward trend in prices of go and services on entrepreneurship.
Date posted: January 30, 2019. Answers (1)
- Suggest five strategies which should which could be adopted by a local enterprise to become a multinational company. (Solved)
Suggest five strategies which should which could be adopted by a local enterprise to become a multinational company .
Date posted: January 30, 2019. Answers (1)
- Highlight six measures that should be put in place in order to make on-line business networking more beneficial to an enterprise.(Solved)
Highlight six measures that should be put in place in order to make on-line business networking more beneficial to an enterprise.
Date posted: January 30, 2019. Answers (1)
- Outline four limitations of the use of social media network in an enterprise .(Solved)
Outline four limitations of the use of social media network in an enterprise.
Date posted: January 30, 2019. Answers (1)
- Explain six features of a good financial plan.(Solved)
Explain six features of a good financial plan.
Date posted: January 30, 2019. Answers (1)
- Outline four reasons why government levy custom duty.(Solved)
Outline four reasons why government levy custom duty.
Date posted: January 30, 2019. Answers (1)
- Examine five stages that are involved in the pre-start-up phase of a new business venture.(Solved)
Examine five stages that are involved in the pre-start-up phase of a new business venture.
Date posted: January 30, 2019. Answers (1)
- Distinguish between the following set of terms:
a) Brainstorming and business incubation
b) Drone entrepreneurs and imitative entrepreneurs
c) Innovation and invention
d) Bank loan...(Solved)
Distinguish between the following set of terms:
a) Brainstorming and business incubation
b) Drone entrepreneurs and imitative entrepreneurs
c) Innovation and invention
d) Bank loan and bank overdraft
e) Micro finance and youth fund
Date posted: January 30, 2019. Answers (1)
- Briefly explain five characteristics of a good business opportunity.(Solved)
Briefly explain five characteristics of a good business opportunity.
Date posted: January 30, 2019. Answers (1)
- Highlight four factors that a business incubator should take into account when deciding which business to incubate.(Solved)
Highlight four factors that a business incubator should take into account when deciding which business to incubate.
Date posted: January 30, 2019. Answers (1)
- Explain seven types of business incubators that promote the efficiency of entrepreneurship.(Solved)
Explain seven types of business incubators that promote the efficiency of entrepreneurship.
Date posted: January 30, 2019. Answers (1)
- Define the term “Business incubators.(Solved)
Define the term “Business incubators.
Date posted: January 30, 2019. Answers (1)
- Explain the essential guideline for successful networking in business.(Solved)
Explain the essential guideline for successful networking in business.
Date posted: January 30, 2019. Answers (1)
- Describe the registration process followed by an entrepreneur in order to be granted patent rights over a business idea or product. (Solved)
Describe the registration process followed by an entrepreneur in order to be granted patent rights over a business idea or product.
Date posted: January 30, 2019. Answers (1)
- Describe six factors to consider when developing an effective business succession strategy.(Solved)
Describe six factors to consider when developing an effective business succession strategy.
Date posted: January 30, 2019. Answers (1)
- Argue the case for and against the following business succession strategies i. Early entry strategy ii. Delayed entry strategy.(Solved)
Argue the case for and against the following business succession strategies i. Early entry strategy ii. Delayed entry strategy.
Date posted: January 30, 2019. Answers (1)
- Discuss four factors that are critical in the success of a partnership in entrepreneurship.(Solved)
Discuss four factors that are critical in the success of a partnership in entrepreneurship.
Date posted: January 30, 2019. Answers (1)
- Entrepreneurial success depends on opportunity recognition. Outline six ways which an entrepreneur can use to identify a business opportunity.(Solved)
Entrepreneurial success depends on opportunity recognition. Outline six ways which an entrepreneur can use to identify a business opportunity.
Date posted: January 30, 2019. Answers (1)
- Citing relevant examples, describe six types of business incubators who nurture young entrepreneurs.(Solved)
Citing relevant examples, describe six types of business incubators who nurture young entrepreneurs.
Date posted: January 30, 2019. Answers (1)