02 Nov 2017
Go to franchise or pursue your own business idea is a question that is often play in the mind of someone who want to start a business. An entrepreneurs who want to start in the business world must think wisely on the steps taken to avoid difficulties in the future. Entrepreneurs are often faced with the risk will either success or fail in business. Thus, entrepreneurs have a variety of ways and options to start a business. A new business can create entrepreneurship (Gartner, 1985). Franchising is one of the form of business organization in which a firm that already has a successful product or service developed by franchisor licenses its trademark and method of doing business to other business which known as franchisee in exchange for an initial franchise fee and ongoing royalty. Entrepreneurs currently see the need for customer satisfaction and begin to act more efficiently to meet the needs of what has been done to provide opportunities for profit (Kirzner, 1985). Entrepreneur is a person who is responsible for generating new ideas and to spark new business which can be explored.
Franchising can be defined as a business opportunity by which the trademark owner (the franchisor) granted an exclusive rights to the local user (franchisee) for selling a products or services and in return receives a payment or royalty and conformance to quality standards. The franchisee have to sign a legal contract with the franchisor and the franchisee have to pays a franchise fee in lump sum. After that, the franchisor will gives the franchisee services needed to open the unit, including training and blueprints for the production process (Bond and Bond, 1991). For franchisee, franchising is a opportunity to utilize proven methods of operation, high-impact advertising, recognized brands or trademarks, and continuing management and technical assistance. In franchising concept system, there are two types of franchising entrepreneur can choose. Firstly, product and trade name franchising which supplier made sales contracts with dealers to buy or sell certain products or product lines. Historically, this approach to franchising has consisted of distribution from single supplier to a large number of dealer through regional supply centre. This franchising method objective is to have a dealer in each area. Secondly, Business-format franchising involves the format or approach to be used by the franchisee in providing the franchisorâ€™s product or service line to the customer. The franchisor granting a license to the franchisee to maintain civil order, determine and collect tax revenues, and make other special tax assessments.
The strong reputation in franchisor business makes entrepreneur sure to invest and enjoy the benefits which provided by the franchisor. There are many significant advantages to owning a franchise business. In most instances, buying a franchise means that an entrepreneur have the authority to use the franchise business concept which has a proven track record of success. Through knowledge transfer, it is huge advantage for entrepreneur to gain a solid reputation in market place. The whole franchise system can enhance an organizations position of competitive and also innovation. The franchising system offers the most potential opportunities in creating large chain at the same time to train franchisee to be an independent person (Hunt, 1977). A new start-up small business is able to associated and linked with a big-business then there is a high probability for the small business to propel since the firm is being backup and supported by an established big business. Running a small business under the franchisor's name and organization is very beneficial for businesses that can't afford much finance and capital investment for their own business.
The effectiveness of the franchisorâ€™s marketing strategy strongly contribute to the success of the business. The franchisor will provide support in marketing tactic in order to offer a best product and service to customers. The franchisor have a interest of big-budget industries to adapt in low-budget business because it is a very effective marketing tactic to ensure the franchisee participate the proper marketing assist for their small business. Mostly, the product and service are advertised at the local and national level by the master franchisor. Since such advertising and promotion materials are often expensive to produce, the franchisors will provide a wide range of point-of-sale advertising materials such as posters, brochures and banners to the franchisees. This practice helps to boost up the knowledge of the product information to the customer. For franchisee, they also will get a same benefit from any national advertising campaigns launched by the corporation with which they have give into business. The franchising system create a solution which is more valuable in term to attract the customers (Caves and Murphy, 1976). For example, the franchisor will do a marketing research in intended to provide the information which marketing and sales strategies for franchising system . This information may provide insights and understanding concerning the needs and desires of the end customers.
In term of operation, franchisor will provide a wide range of help in the areas of administration and general operations to their franchisees. The franchisees is instantly armed with a proven products and production systems, inventory systems, financial and accounting system and human resources guild-lines. This seem that franchisees have a tendency to operate a same system and create network organizations (Larson, 2001). To create a operation network, the franchisor will provide management training to the new franchisee as a guide to them in doing the business according to the franchisorâ€™s manual. This proven operation system manual helps the small business to propel since the firm is being backup and supported by the master franchisor. For the franchisee business, the continuing transfer of knowledge is crucial to ensure the organization can success for the long run (Dobni,2006). The identification and exploitation products and services development typically crucial for the continued success of the franchise business. The sharing information and network organization will create interaction and increase the opportunity for franchisee to be success in their business (Brockman & Morgan, 2006). For example, The franchisee needs the support of franchisor to fulfil their inventory needs. Franchisees are often able to fill inventory needs at discount prices when their business alliance with the franchisor. This is because most typically the franchisor has made arrangements to buy supplies at large-volume prices. Therefore, the supplier will give priority for franchisee to get a continuous supplies so that they will able to compete with national chains and competitor.
In conclusion, franchise business is relatively easy to develop for entrepreneurs because they do not have to bother about the operation since the franchisor provide assistance in their small business. The franchise business system can create network among franchisor and franchisee in term of generating information and knowledge then allow the implementation system to the trustworthy in giving a right to operate the business (Wright, Dunford & Snell, 2001). In general, franchising is also vital sector for the Malaysiaâ€™s economy and an area of entrepreneurial activity with strong public policy benefits. Franchising is one of the best sources of method on new building career. Therefore, the revenue generated by the franchise royalty is a big source of reward and motivation to continue doing business. The advantages and uniqueness of the franchise make confident entrepreneurs to seek entrepreneurial opportunities.
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