Franchise Model

The franchise model is the concept of two business coming to an agreement, where the franchisor gives a franchisee the rights to use the franchisers name and business processes for a annual payment. This is seen by lots of big corporations such as McDonalds and Walmart. This allows a big organization to have their name and product pushed in many different locations and countries all over the globe without actually being there. This allows for access to new markets for corporations. (link.springer.com)

    The reason that so many organizations and companies have gone the route of franchising is, “to facilitate rapid growth while minimizing the need to make large capital outlays, undertake significant new risks, and supply labor to facilitate such growth” (link.springer.com).  By franchising a company there is the ability to grow so rapidly and increase profit quickly due to low risk high reward marketing. But, it is not only the franchiser that is given great opportunity by the partnership. The franchisee also has the ability to start a business that has already proven to be successful. There is a large advantage to starting a business that already has a well know name.

Yet not every part of franchising is as great as it may appear. Because the manager or franchisee are often on salary based pay, means that there is less of an incentive to improve the business to the best it could possibly be. Where as the owner of a similar company, that isn't franchised, will be working harder to produce more profit which will become his earnings. Although given an advantage due to being a brand when opening a franchise store, all business must compete with rivals and are still given the chance to fail.