the term franchising means an agreement between franchisor and franchisee where franchisor grants legally the use of his expertise , trademark, selling goods and services , ideas etc. and in return franchisor asks commission and some percentage share of franchisee 's revenue or profits . it is contractual entry mode used by the firms or companies to enter into new markets in other countries.
following are the advantages :
- association with a well established brand or product
- assistance in getting required finance for establishing the business.
- it helps in expanding into different regions of the world .
- assistance is given in terms of Site location and selection .
- operating according to laid down standard procedures and policies
- get access to market research along with advertising assistance .
- involves low political risk
the disadvantages of franching are as follows :
- franchises may turn into competitors in future.
- if franchise is given to wrong person it can harm the reputation and goodwill of the company in the market .
- quality of the product can be inconsistent which can have negative impact on products image.