A franchise is an agreement that allows an individual to own his business while benefiting from the know-how, trademark and reputation of the established firm.
In times of financial crisis, the economy suffers a downturn and starting a business through franchising becomes preferable due to some advantages that exist.
Firstly franchisee can benefit from the wide recognition of brand name of the franchiser. A franchiser is usually a well established firm with wide customer base and great brand name recognition. Brand equity is important such that the franchisee can benefit from consumer awareness and loyalty, at the same time defends against competition under economic downturn. It is not necessary for the franchisee to spend time, cost and effort in building up customer goodwill and establishing a famous brand name. Take McDonalds as an example. Its restaurants maintain its sales and competitive power under economic downturns and great competition in the catering industry as the brand name is already widely recognized and favored by the local people。
Secondly franchisee can gain access to big business management skills. The franchiser usually possesses important business skills like that in production management, financial management and marketing. These skills are important to a business as they help increase efficiency and effectiveness in terms of resource allocation and goal achievement of business, increasing the change of success of business. The franchisee is not necessary to obtain all these skills by itself through experiences, training and development as it is provided by the franchiser. Take 7-11 as an example. Its flow of goods system and the shop layout management is given to all franchisee to maintain a standardized effective store management.
Thirdly some cost in operating a business can be lowered by franchising. Keep the expense in starting a business acceptably low is important as risks are involved in the business and excess cost...