How Franchising Works | Examples from McDonald's
Two Teachers・2 minutes read
Franchising involves a franchisor with an established brand and a franchisee who benefits from the reputation and support, but faces high initial costs and limited control over business decisions.
Insights
- Franchising provides a low-risk entry into a successful business with established brand recognition and ongoing support but entails high initial costs, ongoing fees, and limited control over crucial business decisions.
- Successful franchises like Starbucks, Subway, and McDonald's offer proven business models, reducing the risk of failure, and provide ongoing training and support to franchisees, leveraging their established reputation and customer base.
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Recent questions
What is a franchise?
A franchise is a business model where a franchisor allows a franchisee to operate under their established brand and systems in exchange for fees.
What are the benefits of a franchise?
Franchises offer a proven business model, established brand recognition, and ongoing support for franchisees, reducing the risk of failure.
What are the drawbacks of a franchise?
Franchises come with high initial investment costs, ongoing fees, and limited control over product range, pricing, and marketing decisions compared to independent businesses.
How do successful franchises operate?
Successful franchises like Starbucks, Subway, and McDonald's provide franchisees with a proven business model, brand recognition, and ongoing support and training.
Is franchising a low-risk business option?
Franchising is considered a low-risk way to start a successful business due to the established reputation, customer base, and support provided by the franchisor.
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Summary
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Franchising: Low-risk, high-cost business opportunity.
- A franchise involves a franchisor with an established brand and a franchisee who pays fees to operate under the franchisor's name and systems, benefiting from the established reputation and customer base.
- Successful franchises like Starbucks, Subway, and McDonald's offer a proven business model with lower risk of failure, established brand recognition, and ongoing support and training for franchisees.
- While franchising offers a low-risk way to start a successful business, it comes with high initial investment costs, ongoing fees, and limited control over product range, pricing, and marketing decisions compared to owning an independent business.
