The Franchise As A Form Of Business Organization Essay

The Franchise As A Form Of Business Organization - Essay Example The franchising concept allows people the ability to purchase a business concept from the franchise. There are lots of benefits associated with franchising. The first benefit is that the franchisee obtains the brand value of a company without having to invest years of marketing efforts to make the company popular. The franchisor is responsible for the marketing budget of the company. Big name franchises such as Burger King, Pizza Hut, and Taco Bell spend millions of dollars each year in advertising to attract customers to the establishments of its franchise owners. When a person purchases a franchise they receive full training on how to operate the business from the franchisor. McDonald’s provides training to its franchisees by sending them to Hamburger University. The franchisor also helps the franchise find a good location for its establishment. The person that buys a franchise gets access to the privileged intellectual property, special formulas, and trade secrets that the company holds. As part of the contract, the franchisee must be purchased the raw materials for its product from the franchisor. Since many franchises have thousands of establishments the matrix company is able to obtain economies of scale that are passed on to the franchise owners. This enables franchisees to have lower material costs than similar businesses competing in an industry. Buying a franchise lowers the overall business risk of starting a company. The person buying a franchise does not have to start a business from scratch. From the first day, the franchise opens the company has an established clientele base that desires the products and services that the franchise offers. Franchises have higher customer retention rates than independent stores. The franchisees receive managerial and administrative support from the corporate headquarters during the lifetime of the business.