Franchising is based on a marketing concept which can be adopted by an organization as a strategy for

business expansion. Where implemented, a franchisor licenses its know-how, procedures, intellectual
property, use of its business model, brand, and rights to sell its branded products and services to a
franchisee.

THE BENEFITS OF FRANCHISING

CAPITAL

The franchisor’s capital requirements will be lower because the franchisees provide the capital to open
each franchised outlet.

MOTIVATED AND EFFECTIVE MANAGEMENT

The local management of each franchised unit will be highly motivated and very effective. They treat the
franchise units as their own and that will usually lead to higher sales and profit levels.

FEWER EMPLOYEES

The number of employees which a franchisor needs to operate a franchise network is much smaller than
they would need to run a network of company owned units.

SPEED OF GROWTH

The franchise network can grow as fast as the franchisor can develop its infrastructure to recruit, train
and support its franchisees.

REDUCED INVOLVEMENT IN DAY-TO-DAY OPERATIONS

The franchisor will not be involved in the day-to-day operations of each franchised outlet.
LIMITED RISKS AND LIABILITY

The franchisor will not risk its capital and will not have to sign lease agreements, employment
agreements, etc.

INCREASING BRAND EQUITY

Levereging off the assets of franchisees helps franchisors grow their market share and brand equity
more quickly and effectively.

ADVERTISING AND PROMOTION

Franchisor will reach the target customer more effectively through co-operative advertising and
promotion initiatives.

CUSTOMER LOYALTY

Franchisors use the power of franchising as a system to build customer loyalty- to attract more
customers and to keep them.

INTERNATIONAL EXPANSION

International expansion is easier and faster, since the franchisee posesses the local market knowledge.