Analyzing Franchising Benefits for New Business Startups

This essay analyzes the advantages of franchising as a method for starting a new business. It discusses how franchising provides a safer and easier route to business ownership compared to starting a business from scratch. The essay highlights several benefits of franchising, including access to an established brand, tested operating techniques, reduced financial risk, and comprehensive training programs. It also covers the advantages of marketing and advertising assistance, purchasing efficiencies through economies of scale, and opportunities to leverage human resources and financial aspects. The paper concludes that franchising offers increased profitability, security, support, and faster growth, making it a highly advantageous option for aspiring entrepreneurs. The essay includes references to support its claims.

Franchising is a safe and easy
way for people to start a new
business
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Introduction
The essay will help in analyzing the advantages of using franchising while opening a new
business. Franchising is regarded as a form of business through which the owner of a method,
service or product acquires the distribution via affiliated dealers. Therefore, the paper will
discuss the benefits of franchising which is an easy and safe way to open a new business.
Benefits of franchising to start a new business
Franchising is determined to be an alternative form of capital acquisition that offers various
advantages while starting a new business. In today's context, most of the entrepreneurs turn to
the franchise as it helps them to start their own business without the risk of the cost of equity or
debt1. Franchisee serves all the capital needs to operate and open a unit, which enables an
entrepreneur to grow by utilizing the resources of others. There is an advantage as the franchisee
gets an opportunity to start a business under the banner of an already established business. The
operating technique, brand and ideas are already tested and tried and is ready to be applied again
within a new location. Before opening a business, a franchisee commits and signs the lease along
with different contracts, which allows the person to expand without any contingent liability. The
risk is limited to the capital that is invested in opening a franchisee firm. In other words, the
amount is less than the amount of developing an additional company-owned location2. The
significant benefit of becoming a franchisee is that business will possess an established service or
product. Whether it is on the international or local level, franchisee provides various benefits
before and after an investment is done. Familiarity also helps an entrepreneur to develop a
consumer base due to the potential patrons with the help of pre-existing knowledge regarding the
brand.
1 "Startupsmart — The Latest News On Australia's Startup Ecosystem". 2019.
Smartcompany. Accessed September 27 2019.
https://www.smartcompany.com.au/startupsmart/
2 Marta Ziółkowska. "Success Factors and Benefits of Social Franchising as a Form of
Entrepreneurship." Studia i Materiały 1/2017 (23) (2017): 37-47.

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However, the other benefits of franchisee include the availability of training programs for
franchisees before they start their own business. Most of the franchisors also provide ongoing
training opportunities so that franchisees can gain advantages from new developments within the
franchise's industry. It allows an entrepreneur to investigate the reputation and experience of the
franchisors while deciding whether to lend money or not. When a complex situation arises,
franchising provides an opportunity for the franchisee to get access to qualified staff and
technical support who can serve advice3. Moreover, it is also seen that the franchise system
provides purchasing efficiencies with the help of economies of scale. Few or all the required
goods or services are offered by either the trusted suppliers or the franchisor. While starting a
new business, the franchises can also take benefits of bulk discounts. Franchising also provides
marketing and advertising assistance. The corporate offices of franchises carry out market
research that results in more effective ads and better targeting. The pooling of the cost also helps
in keeping the cost affordable.
Franchising also provides opportunities to leverage human resources and financial aspects. It
allows new business organizations to compete with larger businesses. In order to start a new
business, it enables the franchisors to function with leaner firms effectively4. It allows the
franchisees to undertake human resources function, payroll, accounting, training, hiring, local
marketing, lease negotiation and site selection. As a result, the franchise firms will be more
profitable as compared to other large businesses, and it possesses a security and support system.
It can also be said that the combination of increased organizational leverage, profitability and
faster growth are the major reason due to which franchising is given great importance as
compared to other businesses5. Franchising offers the opportunity for franchisees to start and
3 Scott Weaven, Brent L. Baker, Chase Edwards, Lorelle Frazer, and Debra Grace. "Predicting
organizational form choice from pre-entry characteristics of franchisees." Australasian Marketing
Journal (AMJ) 26, no. 1 (2018): 49-58.
4 Jesper Andreasson, and Thomas Johansson. "Glocalised fitness: the franchising of a physical
movement, fitness professionalism and gender." Leisure/Loisir 42, no. 3 (2018): 301-321.
5 Edyta Gheribi. "Development of franchising as a business model in the Polish gastronomy
business." Management and education 13 (2017): 7-13.

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execute business effectively in markets that possess less chance for development. On the other
hand, as the cost of becoming a franchisor is less in comparison with the cost of starting one
more location, thus the startup risk is less. As a result, the combination of these aspects serves a
franchisee with substantially less risk. It allows the franchisors to expand to more number of
units without spending any of their capital on unit expansion and with limited investment.
Conclusion
The paper demonstrated an understanding of the benefits of franchising in order to open a new
business in a new location. It has been observed that franchising provides numerous advantages
to the franchisee to open and operate a new business without any risk such as increased
profitability, security and support and increased valuations.

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References
“Startupsmart — The Latest News On Australia's Startup Ecosystem". 2019. Smartcompany.
Accessed September 27 2019. https://www.smartcompany.com.au/startupsmart/
Andreasson, Jesper, and Thomas Johansson. "Glocalised fitness: the franchising of a physical
movement, fitness professionalism and gender." Leisure/Loisir 42, no. 3 (2018): 301-321.
Gheribi, Edyta. "Development of franchising as a business model in the Polish gastronomy
business." Management and education 13 (2017): 7-13.
Weaven, Scott, Brent L. Baker, Chase Edwards, Lorelle Frazer, and Debra Grace. "Predicting
organizational form choice from pre-entry characteristics of franchisees." Australasian
Marketing Journal (AMJ) 26, no. 1 (2018): 49-58.
Ziółkowska, Marta. "Success Factors and Benefits of Social Franchising as a Form of
Entrepreneurship." Studia i Materiały 1/2017 (23) (2017): 37-47.