Advantages of the Franchiser and the Franchisee

Franchisor Advantages- One advantages to being the parent company of a franchise is a shared liability within the company. The parent company shares the responsibility with all of the other franchise owners. If the company makes a mistake itself everyone is affected or if say one franchise company makes triple the usual profit the franchiser makes a huge profit helping the whole entire company. Another advantage is profit in bulk. Since the franchiser supplies all of its chains with the food products they can buy food in huge bulk making the price of the items extremely cheap for them to sell to their franchises at a reduced price then normal. This also makes the franchiser a profit because they can then sell it to their franchises at a higher price. Even though they are making a profit off of the products they are still selling them extremely cheap to the franchises to use for their products. When selling the name of their company franchisers make a huge sum of money. McDonalds for instance sells their name for one million eight hundred thousand dollars a piece. This is huge for the franchiser because for every new McDonalds they open they make a profit off of the name, products they sell to them, and a piece of the profits that the franchise makes. Since almost all of the McDonalds franchises sign the same contract they must follow all of the rules that the franchiser sets for the franchise. This makes it easier for McDonalds to create supplies and do national advertising around the country. Because all of the franchises get the same materials they can make all of their cups, bags, and machines the same. This makes these products extremely cheap for the franchise and also makes the franchiser a profit by selling it to the franchise for more then they bought it for. Since as they want the same franchise restaurant around the country they also control the management that the franchise is run by. If a person does not pass the management training that a franchiser gives to the owner of the franchise they can decide not to sell their name to them because they know that they will not run the franchise correctly. They have total control over who owns and runs their business because they understand that the liability of the whole entire business is in the hands of every franchise owner. To own a franchise you must first own the name of the franchise, which is extremely expensive. After buying the name of the franchise the business owner is in debt and now has to pay back the money that they have loaned to buy the franchise loan. This makes the franchise owners work extra hard to help pay back the loans making the franchiser even more of a product.

Franchisee- One of the best advantages to being a franchise owner is advertising. Since you are a part of a franchise you never have to do advertising because the franchiser does national advertisements across the country. You also get the nationally known name that will help bring in customers who have eaten from that franchise. If a person can relate a good experience that they had at a restaurant they are more likely to eat there again. Another huge advantage is the market expertise that the franchisees have about the local economy and area that they are in. Since they know the area that they are iun they can decide whether or not selling a product of a certain franchise in one area may be better then selling that product in another area. If a franchise gets into debt or into trouble they can always get some financial support from the franchiser. You can also get financial help when starting up your business from the franchiser if need be. Also if a franchise needs technical help or managerial support they can get that from the franchiser which will try to make you as successful as possible as you can be because they want you to make them money and to make them money so that they can have the highest margin of profit possible.