The presentation starts by the providing the purpose of the presentation, An introduction is then provided that gives the definition of franchising, background information that about the US franchising business, and the legal requirements for investing in a franchised business. It then follows the issues that one has to consider before investing in franchised business.
The presentation then looks at the benefits of investing in a franchised business and compares them with the disadvantages of investing in a franchised business, on drawing a conclusion on whether to invest in a franchised business or not.
The purpose of the presentation is to explain what it entails on investing in the franchised business. The factors that one ought to consider before investing in franchised business and the possible benefits and disadvantages of investing in a franchised business. Therefore, the presentation takes a perspective of providing information to investors on how to choose a viable franchised business.
The franchising business implies the situation in which a company creates distributing channels of its products by offering this opportunity to independent entities run the business on the company name. The independent entities known as the franchisees are expected pay the franchiser some fee before they take up the business. They are also expected to follow the directives as provided by the franchiser.
The Franchising business in the United States contributes to more than 1trillion of the national income and has provided employment opportunities to more than 8 million Americans. The business comprises over 300,000 franchisee. The franchising business is governed by the Federal trade commission. The execution of the rules that govern the franchising business is done at the state level, where each state is supposed to regulate its own franchising business by designing their respective disclosure requirements. The aim of the rules is to provide protection to the investors in the franchise business. The disclosure requirements set by the states are meant to provide the investors with information that will enable them to make informed decision.
Investing in a Franchised business can be perceived as a purchase of a business concept from the franchiser, which has been developed for a longtime. It eliminates the task of on how an investor has to set his or her business as the standards for operating the business are predetermined by the franchiser. This is done as a strategy for product promotion.
Before an investor makes a decision on whether to invest in some company's franchise, the investor is supposed to consider the nature of the products that are dealt with by the franchiser in relation to their demand, given the market condition for various franchisers products in the franchising business.
This will enable the investor to avoid the possibility of investing in nonprofitable franchised business. The investor should also consider the location of the franchised business in relation to the nature of the products.
For example, investing in a food franchised business, it requires a location that has a high population.
High population will provide the required demand to ensure profitability through the increased sales. Therefore an investor needs to make an inquiry about the demographic characteristics of a given area before locating a business in that area (http://www.ftc.gov/bcp/edu/pubs/consumer/invest/inv05.shtm.).
There are a number benefits that arise from investing in franchised business.
The risks that are associated to investing in a new business are reduced as the investor will be investing in a business opportunity that has been tried and tested. The risks that are overcome include the acceptability of the products in the market and the possibility of attaining a breakthrough in the production of the product (http://freshthinkingbusiness.wordpress.com/2008/07/02/12-reasons-for-investing-in-a-franchise.).
The franchisee enjoys the brand loyalties that have been created by the parent company since its was establish. This reduces the effort that is required to enhance the demand for the products sold by the franchisee as there exist a ready market that has been created by the parent company and other franchisees started early by the the same franchiser.
The equipment to start a business are well spelled out to the franchisee which eliminates the cost and time of consulting experts because the information is provided by the franchiser as part of the contract (Williams, 102).
The franchisee will also benefit from the extensive advertisement and marketing done by the franchiser. The franchisees are expected to observe a standardized accounting procedures that enable easy comparability for the purposes of decision making.
The franchisee are certain to share their experience which will have an impact of improving productivity.
The disadvantages of investing in a franchised business is that, a mistake which is done by one franchisee or the franchiser, will affect the performance of the other franchisees as they are perceived as one company regardless their independent entities. The franchisee is also tied to operate within a limited number of products regardless of operating as an independent entity.
Investing in a franchised business is equivalent to the purchase of a business concept. The franchisee is expected to operate the business as an independent entity but it must be in conformity with the standards set by the franchiser. The investor is supposed to consider the nature of the products in relation to the market condition before making a commitment. The location of the business should be guided by the demographic characteristics of the population.
The benefits that are associated to investing in a franchised business are based on the operating under a big umbrella that provides protection and guidance. The disadvantage of investing in a franchised business is that a mistake done by one party normally affects the other parties and the franchisees are tied to operate within a given scope as provided by the franchiser. (http://www.ftc.gov/bcp/edu/pubs/consumer/invest/inv05.shtm.).
Thinking Business. Reasons for Investing in a franchise. Retrieved from:
Federal Trade Commision. Buying a franchise: A consumer Guide. Retrieved from: http://www.ftc.gov/bcp/edu/pubs/consumer/invest/inv05.shtm., 2008
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