Advantages And Disadvantages Of Trade Secret Video
Advantages And Disadvantages Of Trade SecretDefine franchises as a form of business Discuss the advantages and disadvantages of franchising for the franchisee Discuss the advantages and disadvantages of franchising for the franchisor A franchise is a business model that involves one business owner the franchisor licensing trademarks and methods to an independent entrepreneur the franchisee for a prescribed period of time.
For the franchisor, the franchise is an alternative to expanding through the establishment of a new location, which avoids the financial investment and liability of a chain of stores.
Buying a Franchise
If the franchisees are successful then the franchisor can grow its brand and market presence while the franchisee, in effect, does all of the work. The United States is a leader in franchising, a position it has held since the s when it used the approach for fast-food restaurants, food inns, and, slightly later, motels during the time of the Great Depression.
By law, franchisors must disclose certain information about their business to potential buyers. Make sure you get all the information you need first before entering into this form of business.
The following strategies can help you gain a solid understanding of what to expect as well as the risks that could be involved: Be a Detective. In addition to the routine investigation that should be conducted prior to any business purchase, you should be able to contact other franchisees before deciding to invest.
Watch Out for Possible Pitfalls. The contract between the two parties usually benefits the franchisor far more than the franchisee.
The franchisee is generally subject to meeting sales quotas and is required to purchase equipment, supplies, and inventory exclusively from the franchisor. Seek Professional Help. The tax rules surrounding franchises are often complex, and an attorney, preferably a specialist in franchise law, should assist you to evaluate the franchise package and tax considerations. An accountant may be needed to determine the full costs of purchasing and operating the business as well as to assess the potential profit to the franchisee. Franchise Taxes The taxation of a franchise depends on the underlying form of ownership.
Advantages for the Franchisee
Generally franchises are required by the franchisor to be established as a corporation or LLC. Ultimately, the franchise agreement governs this, and individuals looking to purchase a franchise should scrutinize any agreements with regard to prescribed legal ownership structure.
The franchise has an established image and identity already, which can reduce or simplify marketing efforts. Many franchises are nationally advertised brands, shortening the time it takes for the franchisee to establish a market presence. Access to Expertise, Ongoing Support.]
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