Why is franchising a popular way to expand distribution of an effective service concept?

What are some disadvantages of franchising, and how can they be mitigated?

Answer

The first advantage is access to capital. In order to enter a new market, business owners have
to come up with their own money. Franchising businesses have access to as much capital
flow as there are self-employed franchisees as franchisors. Yes, franchisors still have a new
per-unit payout fee, but many of the costs are borne by the franchisees: real estate, fixtures,
furnishings, equipment, inventory, working capital, etc.

Second, by franchising a franchisor, you gain access and market knowledge in a variety of
sectors. For example, here are a few things self-employment should address before expanding
into new areas: (Note: The following is merely an explanation, not a complete list of
concerns. Consult with your appropriate advisor before taking any action.)

Third, franchising allows you to grow your business without diversifying your top
management resources. thin. Running any place independently can consume not only your
own business resources, but also your mental and physical abilities. The franchising system
allows you to handle your day-to-day business at non-franchisor-type venues. Therefore, the
franchise can focus on business optimization, franchise support and future planning.

Disadvantages and how to mitigate:

1) High initial investment: Individuals can franchise any company today, as models have
advanced in several areas that were previously tabooed. The initial cost of an investment
depends on the franchise selected for the investment and its sector. Some cheap investments
are required and any budget can be easily adjusted, but some are known and require huge
amounts of money. Make sure your research is at the highest level and make sure you know
about the total royalties and initial investment required to start a franchise.

2) Limited Creativity: New franchises must act according to the instructions of the parent
company. No room for change, but this limited creativity is a major drawback of the
franchise. If you are looking to explore new horizons and enter unexplored territory, the
franchise model isn't for you.

3) Lack of privacy: new franchises are completely dependent on the parent company for
direction and operating system. In order to improve audit royalties payments, all financial
information must be provided to the franchisor. The business model connects all franchises to
each other.
4) Decline in Profits: When you start your own business as an entrepreneur, the profits are all
yours. This doesn't happen in franchises. In the preparatory phase, you will have to pay an
initial fee and a royalty fee, and share a portion of those profits with the parent company.

5) Shared Information: If you are operating a business, close all doors to prevent information
leakage. Businesses take special care to protect trade secrets or information regarding their
finances, operations, etc. The franchising model is the other way around, as all information is
being actively shared through all relevant retailers.

What are the key drivers for the increasing globalization of services?

Answer

The four main sectors of the driving force for globalization are market government. cost and
competition. These external factors mainly affect the main conditions for the possibility of
globalization of entire industries, which are not under the control of individual enterprises.
Market drivers include areas such as general customer needs and transferable marketing. This
is the emergence of a global market of standardized products, allowing enterprises to meet
new market demand for their existing products. Government influence is also a major driving
force, and policies help reduce trade barriers and transition to an open market economy.
Access to new markets and human capital allows companies to gain new economies of scale
to sell in bulk and explore the benefits of outsourcing and low-cost production of income in
the area of driving cost advantage. For competitive drivers, the expansion of cross-border
trade through foreign direct investment (FDI) helps expose companies to new competitors by
increasing interdependence between countries or organizations.