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Outline the advantages and disadvantages for a business in the fast food sector of choosing franchising as a method of business expansion. - Leaving Cert Business - Question 5 (A) - 2018
Question 5 (A)
Outline the advantages and disadvantages for a business in the fast food sector of choosing franchising as a method of business expansion.
Worked Solution & Example Answer:Outline the advantages and disadvantages for a business in the fast food sector of choosing franchising as a method of business expansion. - Leaving Cert Business - Question 5 (A) - 2018
Step 1
Advantages of Choosing Franchising
Answer
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Low Capital Investment: Franchising requires a lower capital investment from the franchisor compared to opening company-owned outlets, making it a popular method to expand the business in the fast food sector.
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Rapid Expansion: Franchising allows for rapid expansion. By leveraging the capital of franchisees, a business can increase the number of outlets in a short period without incurring high overhead costs associated with managing these outlets.
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Motivated Management: Franchisees are often more motivated to operate their restaurants successfully as they have a personal stake in the business. This ensures that the franchisee is dedicated to making their outlet successful, benefiting the overall brand.
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Economies of Scale: By increasing the number of outlets, businesses can benefit from economies of scale. Successful franchisors can negotiate better deals with suppliers, reducing costs and increasing profitability.
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Less Management Burden: Franchisees are responsible for the day-to-day management of their outlets. This means the franchisor can focus on overall brand development and support rather than micromanaging individual restaurants.
Step 2
Disadvantages of Choosing Franchising
Answer
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Loss of Control: The franchisor loses direct control over the day-to-day management of franchise outlets. Each franchisee operates independently, which can lead to inconsistencies in brand standards.
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Reputation Risk: The reputation of the entire franchise can be impacted by the performance of individual franchisees. If one outlet performs poorly or causes issues, it can affect the perception of the brand as a whole.
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Training Requirements: A comprehensive training program for franchisees is necessary, requiring significant time and resources. This can be costly and time-consuming, impacting initial setup.
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Monitoring Challenges: Franchisees need to be monitored regularly to ensure they adhere to performance standards and brand guidelines. This continuous oversight can strain corporate resources.