Advantages of Franchising

Running head: ANALYSIS OF SMALL BUSINESS DEVELOPMENT
ANALYSIS OF SMALL BUSINESS DEVELOPMENT
Name of the Student
Name of the University
Author Note

1ANALYSIS OF SMALL BUSINESS DEVELOPMENT
Table of Contents
Question 1A – Summary of the Group’s Business Idea..................................................................2
Question 1B – Team Work..............................................................................................................2
Question 1C – Presentation experience...........................................................................................3
Question 1D – Alternative Scenario................................................................................................4
References........................................................................................................................................6
Question 2 – Advantages and disadvantages of franchising...........................................................7
Introduction..................................................................................................................................7
Advantages and disadvantages of franchising as a growth strategy............................................8
Two issues that can arise between franchisor and franchisee and strategies that can resolve the
tensions......................................................................................................................................12
Conclusion.................................................................................................................................14
References......................................................................................................................................15

2ANALYSIS OF SMALL BUSINESS DEVELOPMENT
Question 1A – Summary of the Group’s Business Idea
The business idea that has been developed by my Group is mainly based on the
development of a small business or start-up organization that will be able to cater to the needs of
different types of customers. The small business organizations have the ability to manufacture
products that are able to target a niche group of consumers. The demands of the niche customers
are taken into consideration for the purpose of proper development of the products.
Strengths – The major strengths that are related to the proper operations of small
business organizations are that they can develop effective relationships with the customers in
order to understand their needs (Ellis and Kisling 2017).
Weaknesses – The major weakness of my Group’s business plan is mainly based on the
lack of international presence and a large group of consumers as well. The awareness regarding
the products that are offered to the customers are also quite low in comparison to the other
organizations.
The entrepreneurs start the small businesses with single ideas that are further transformed
into large business organizations which are able to fulfil the needs of different types of customers
in various parts of the world. The growth of a small business is mainly dependent on the ideas of
the entrepreneurs and the contribution that they are able to provide to the organization as well
(Gama, Frishammar and Parida 2019).
Question 1B – Team Work
The members of my team have been able to provide their contribution to the proper
development of business idea which is implemented in order to start the small businesses. The

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process of team forming is considered to be a major factor that has an impact on the proper
development and implementation of the ideas. Different members of the group had provided
their ideas based on which discussions were made. The discussions had further led to the proper
selection of the most suitable idea from those which had been provided (Li et al. 2018).
The team forming process had also played a major role in enhancing the future career of
the employees and their development as well. The future career growth of my team members will
also be affected in a positive manner by the activities they have performed within the team. The
contributions offered by team members have helped in formation of effective ideas that can be
implemented in the operations. I have been able to gain effective knowledge as a part of the team
(Moore Johnson, Reinhorn and Simon 2016). The collaboration that I have formed with the team
members have supported the proper formation of different business ideas. The business ideas
have supported the growth of small business in an effective manner. The specializations and
roles were provided to the team members based on the levels of knowledge that have gained and
their levels of efficiency in the operations as well. The teams that have been formed in the
organization have supported in implementation of business ideas and improvement of the
organizational operations as well (Taghizadeh, Rahman and Marimuthu 2019).
Question 1C – Presentation experience
The development of a business plan is considered to be important for the proper
formation and implementation of the small business based ideas. The ideas of small business can
be used by the entrepreneurs with the support that is mainly offered by the detailed business
plans. The business idea can be presented by the groups with the help of a business plan that is
based on different parts. The issues can be faced by groups if a proper business plan is not
formed and implemented by the groups. The detailed presentation of the business idea can be

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provided by a particular group with the help of proper formation of detailed business plans. The
business plans can be based on the proper examination of the internal and external environment
in which the firm will start its operations (Moore Johnson, Reinhorn and Simon 2016).
The micro and macro environment factors can have an influence on the profitability
levels and revenues that can be gained in the industry. The business plan will also provide a
proper budget based on which the business operations will be conducted in the future. On other
hand, the process of submitting simple documents will not be able to provide detailed picture of
the business operations that can be developed in the future. The future operations of business and
presentation of the business idea will thereby be based on the proper formation of a business
plan(Taghizadeh, Rahman and Marimuthu 2019).
Question 1D – Alternative Scenario
The business plan that has been developed by my group provides a detailed picture of the
future growth that can be experienced by the small business. The positive prediction that has
been shown by my group in the business plan can be considered as optimistic in nature. The
growth trajectories in the business plan are based on the analysis that has been made with respect
to the external and internal environment of the organization. The operations of the small business
will be based on the modern environment related factors. The alternative scenarios will be
related to the changes that can be made in the business operations and strategies that have been
implemented as well (Taghizadeh, Rahman and Marimuthu 2019).
The formation of a better plan will be able to support the growth of small business in the
future and the success that will be gained in the future as well. The business plan will thereby
provide alternative strategies in order to ensure that the small business can maintain its position

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and customer base in the industry. The formation of a better plan will also be able to enhance the
customer base of the small business organization (Gama, Frishammar and Parida 2019). The
business idea will prove to be successful if the business plan can provide different strategies that
can be implemented in the operations. On the other hand, the alternative strategies can also
support the organization and its effective operations in the future as well. Proper growth of the
small business will also be ensured with the help of different strategies that are suggested as a
part of the business plan (Vogel 2017).

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References
Ellis, M. and Kisling, E., 2017. Collaborative approach to successful virtual team leadership.
In Encyclopedia of Strategic Leadership and Management (pp. 55-70). IGI Global.
Gama, F., Frishammar, J. and Parida, V., 2019. Idea generation and open innovation in SMEs:
When does market‐based collaboration pay off most?. Creativity and Innovation
Management, 28(1), pp.113-123.
Li, H., Shao, P., Thatcher, S.M. and Sun, X., 2018, July. A Multi-Level Model of Family
Demands Diversity, Team Work-Family Conflict, and Employee Effort. In Academy of
Management Proceedings (Vol. 2018, No. 1, p. 15131). Briarcliff Manor, NY 10510: Academy
of Management.
Moore Johnson, S., Reinhorn, S.K. and Simon, N.S., 2016. Team Work: Time well
Spent. Educational Leadership, 73(8), pp.24-29.
Taghizadeh, S.K., Rahman, S.A. and Marimuthu, M., 2019. Idea generation leveraged from
value co-creation process enhances new service development performance. Journal of Strategic
Marketing, 27(6), pp.483-504.
Vogel, P., 2017. From venture idea to venture opportunity. Entrepreneurship Theory and
Practice, 41(6), pp.943-971.

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Question 2 – Advantages and disadvantages of franchising
Introduction
As discussed by Antia, Mani and Wathne (2017), franchising can be defined as a form of
business with the help of which an owner or franchisor of a particular product, method or service
that is able to obtain distribution through the affiliated dealers. A franchisee initially has to pay a
fee and the ongoing royalties to the franchisor and in return the franchisee can gained use of the
trademark. The franchisor provides support and rights so that they can use the franchisor’s
system for conducting business operations and selling the services and products as well. The
franchisor thereby offers many different advantages to the franchisee along with different other
advantages which are not provided to the entrepreneur when he had started the operations of the
firm (Badrinarayanan, Suh and Kim 2016).
The reputed franchisors always conduct detailed research of the market before they plan
to start a new outlet. The franchiser is also responsible for providing a clear picture related to the
competition and the ways by which they can develop a competitive advantage. The franchisees
are able to enjoy different benefits related to strength that an organization is able to develop
(Crosno and Tong 2018). The small business organizations can implement the process of
franchising in order to enhance their presence and increase the profitability levels as well. Small
organizations can aim at increasing their growth levels in an efficient manner with the help of
proper implementation of franchising process. The report will be based on the advantages and
disadvantages that are provided by implementation of franchising process by small business
organizations (Croonen and Broekhuizen 2019).

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Advantages and disadvantages of franchising as a growth strategy
The major advantages that are provided by the process of franchising as a proper growth
strategy are as follows,
Cost-effective expansion – The franchisees are able to handle research process
and funding for the outlets in the chain and this is able to reduce the amount of
capital that has to be spent by the organization. The additional funds can be
gained by the organizations from the investors or the banks for the purpose of
enhancing the growth of the business (Frazer et al. 2020).
Marketing support – The location of a franchise can use the marketing plans in
order to eliminate the guess work that is required for starting the independent
business operations.
Additional revenue sources – The franchisor can receive additional levels of
income based on the royalties that are paid by the franchisees with respect to the
franchise agreement. The royalties mainly include monthly fees that include a
particular percentage of gross sales gained by franchisees (Gorovaia and
Windsperger 2018).
Acquiring the talented managers – Managers are appointed for operating different
franchised locations for the purpose of ensuring their success. The managers will
also be responsible for handling the issues that related to compensation of workers
and the employees as well.
Scalability – The franchise agreement will be developed with respect to the goals
and needs in order to focus on the overall growth of the organization (Krzeminska
and Zeyen 2017).

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The risks related to failure of the business organizations are reduced due to
implementation of franchising process. The small organizations can thereby aim
at enhancing the business operations with the support that is provided by the
development of franchisees in different areas. This can also prove to be helpful
for the organization to enhance its presence in the market.
The organization will also be able to use a brand that is recognized and
established in nature. Small businesses will be able to gain maximum levels of
benefits from the established organizations (Nyadzayo, Matanda and Ewing
2016).
The requirement of prior experience in the industry is low as the organization can
start the operations with support that is offered by the well-known and
experienced franchisor.
The small organization will be able to provide competition to the other large
organizations with the help of brand name and value that has already been gained
by its franchisor in the market (Rahatullah and Raeside 2018).
Small businesses will be able to gain financial support with the proper use of
brand value that has been gained by the large organizations. The reputation that
has been formed by the firm is able to play a major role in ensuring financial
support for small organizations.
The supplier base of large organizations or the franchisors can help the
franchisees so that they are able to establish the business operations and can also
maintain the operations in an effective manner. The existing suppliers will be able

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to provide the required raw materials to smaller organizations in order to improve
their position in the industry (Nyadzayo, Matanda and Ewing 2016).
The disadvantages that are faced by the organizations that implement franchising method
are as follows,
Capital investment – The small business organizations can develop the franchise
agreement with proper investment of money and time. The preparation of legal
documents are also considered to be an important aspect related to the proper
development of franchised stores.
Less control – The instructions and training will be followed by different
franchisees and they can aim at implementing changes the in the formation of
agreements. The franchisees are however considered to be independent in nature
and the negotiations are also not necessary (Rosado-Serrano, Paul and Dikova
2018).
High costs of legal action – The franchisees can sometimes refuse to provide
effective levels of cooperation or the business can also become unprofitable. The
franchisors are however not able to take the legal actions easily even if the
business is not suitable.
Regulation – The franchises are mainly regulated by the federal and the state laws
as well. The formation of a Franchise Disclosure Document or FDD and the other
regulatory documents is considered to be important for the organizations (Rusman
and Karim 2017).

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The restrictions that are a part of the franchise agreements can have an impact on
the business operations and the customer base that is gained by the organizations
as well.
The franchisees can also have a negative impact on the reputation that is
developed by the brand. The recruitment process implemented by the small
organizations has to be effective and can also influence the profitability levels in a
huge manner
(Varotto and Parente 2016).
The franchisees have to be operate under the policies and directives that have
been developed by the parent company. The levels of creativity in the operations
of franchisees are considered to be quite low and this has a negative impact on the
products that are offered to the consumers. The parent organization has
knowledge regarding different facets of the business operations. The products that
are being sold and the raw materials or ingredients are all decided by the parent
organization. The franchisees have to operate according to the policies and
regulations that have been set by the parent company (Rusman and Karim 2017).
The franchisees are dependent on the parent organizations for directions related to
the operating processes and systems as well. The financial information of the
franchisee has to be provided to the franchisor or the parent organization in order
to maintain the operations in an effective manner. The royalty payments also have
to be provided to franchisors in order to maintain the agreements that are
developed between them. Business model is able to interlink the franchisees
together with the franchise based agreements. The franchisees are not able to

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maintain the privacy of the operations based on financial activities (Varotto and
Parente 2016).
The decreased profits of franchisees are mainly related to the shares that have to
be provided to the parent organizations. The franchisees offer small amount of the
total revenues to parent companies and this is able to influence the ways by which
profit margins that are gained by them.
The leak of information is considered to be a major factor that has to be taken into
consideration by the franchisees when they aim at maintaining the operations. The
parent companies aim at sharing the information with the other franchise and the
other outlets are also instructed to do so (Watson et al. 2016).
The relationships that are formed by the parent organizations with suppliers have
an impact on the operations of the franchisees as well. The franchise model has to
be considered in a detailed manner for the purpose of understanding the
importance of the suppliers for the raw materials that are provided. The major
disadvantage related to the development of franchising process is based on proper
usage of the supply network that can be dictated by franchisors (Weaven, Baker
and Dant 2017).
The franchisees will not be able to leave the business operations easily and this is
mainly based on the operations and activities that are performed by the parent
organizations. The terms of the agreement are able to influence the exit process
that can be implemented by the franchisees (Rosado-Serrano, Paul and Dikova
2018).

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Two issues that can arise between franchisor and franchisee and strategies that can
resolve the tensions
Issue number one – The first issue that can arise between the franchisor and franchisee is
considered to be based on the royalties that the franchisee has to pay in order to gain from the
recognition gained by the parent organizations. The initial license fee has to be paid to the
franchisors along with the regular royalties that are paid on a periodic basis. The franchisees are
not happy with the changes that can take place in fees that have to be paid to the parent
organizations. For example the case of Domino’s can be taken into consideration for the purpose
of understanding this issue. In the year 2018 different franchisees of Domino’s had threatened to
stop the development of new stores in order to change the structuring process of profit models
(Badrinarayanan, Suh and Kim 2016).
Strategy to resolve the issue – The negotiation of royalties and franchisee costs are
considered to be quite tough and the major solution that can be provided to the organizations is
based on strong alignment between the franchisor and franchisee for the purpose of growing
sales. The franchises have to be supported and the franchisors on the other hand have to be
confident about the effective operations (Gorovaia and Windsperger 2018).
Issue number 2 – The second issue that has to be taken into consideration based on
relationships between franchisee and franchisor is based on the onus that franchisees have to
improve the business relationship. Franchises are able to work with respect to the consistency
levels of menu, brand, design and the services that are provided to the customers as well. For
example, Burger King can be considered for understanding the issue that is faced in relationships
between franchisor and franchisee. Burger King had noticed that 37-location franchisees of the

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organization were not meeting the service standards and the company had thereby sued the
franchisee (Koh et al. 2018).
Strategy to resolve the issue – The franchisors need to continue the process of monitoring
levels of brand consistency after the restaurant has been opened. The note has to be taken based
on the ways by which the franchise-owned locations start to slack in the operations. The benefits
that are gained by the franchisee has to be maintained and the standards have to be met as well
(Badrinarayanan, Suh and Kim 2016).
Conclusion
The report can be concluded by stating the relationships that have been developed
between the franchisors and franchisees are based on the agreements that are formed during the
start of the operations. The advantages and disadvantages that are faced by the franchise process
have a major influence on the ways by which the franchisees and franchisors can maintain the
operations. The two major issues that have been taken into consideration for the purpose of
analysis can be resolved effectively by the strategies that are suggested.

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References
Antia, K.D., Mani, S. and Wathne, K.H., 2017. Franchisor–franchisee bankruptcy and the
efficacy of franchisee governance. Journal of Marketing Research, 54(6), pp.952-967.
Badrinarayanan, V., Suh, T. and Kim, K.M., 2016. Brand resonance in franchising relationships:
A franchisee-based perspective. Journal of business research, 69(10), pp.3943-3950.
Croonen, E.P. and Broekhuizen, T.L., 2019. How do franchisees assess franchisor
trustworthiness?. Journal of Small Business Management, 57(3), pp.845-871.
Crosno, J.L. and Tong, P.Y., 2018. Just going through the motions? An empirical investigation
of control, compliance, and performance in franchisor-franchisee relationships. Journal of
Business Research, 92, pp.360-373.
Frazer, L., Merrilees, B., Nathan, G. and Thaichon, P., 2020. Creating Effective Franchising
Relationships: Challenges of Managing Mature Franchisees. In Entrepreneurship and
Organizational Change (pp. 135-148). Springer, Cham.
Gorovaia, N. and Windsperger, J., 2018. The choice of contract duration in franchising networks:
A transaction cost and resource-based view. Industrial Marketing Management, 75, pp.125-133.
Koh, Y., Rhou, Y., Lee, S. and Singal, M., 2018. Does franchising alleviate restaurants’
vulnerability to economic conditions?. Journal of Hospitality & Tourism Research, 42(4),
pp.627-648.
Krzeminska, A. and Zeyen, A., 2017. A stewardship cost perspective on the governance of
delegation relationships: The case of social franchising. Nonprofit and voluntary sector
quarterly, 46(1), pp.71-91.

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Nyadzayo, M.W., Matanda, M.J. and Ewing, M.T., 2016. Franchisee-based brand equity: The
role of brand relationship quality and brand citizenship behavior. Industrial Marketing
Management, 52, pp.163-174.
Rahatullah, M.K. and Raeside, R., 2018. Franchisee actions trigger franchisor power strategy
alterations. Journal for International Business and Entrepreneurship Development, 11(2),
pp.140-162.
Rosado-Serrano, A., Paul, J. and Dikova, D., 2018. International franchising: A literature review
and research agenda. Journal of Business Research, 85, pp.238-257.
Rusman, R.Y. and Karim, I., 2017. The Influence of Relationship Marketing among Franchisee
and Franchisor in Fried Chicken Local Franchise. International Journal of Social Science and
Development, 1(2), pp.163-169.
Varotto, L.F. and Parente, J.G., 2016. Franchisor-franchisee relationship quality: Time of
relationship and performance. Revista de Administração de Empresas, 56(6), pp.600-610.
Varotto, L.F., Parente, J.G. and Lopes, E.L., 2017. Franchisor–Franchisee relationship quality
and performance: influence of personality traits. In Marketing at the Confluence between
Entertainment and Analytics (pp. 1149-1163). Springer, Cham.
Watson, A., Dada, O.L., Grünhagen, M. and Wollan, M.L., 2016. When do franchisors select
entrepreneurial franchisees? An organizational identity perspective. Journal of Business
Research, 69(12), pp.5934-5945.
Weaven, S., Baker, B.L. and Dant, R.P., 2017. The influence of gratitude on franchisor‐
franchisee relationships. Journal of Small Business Management, 55, pp.275-298.