Manufacturing franchise opportunity: These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor's name and trademark. This type of franchise is found mostly in the food and beverage industry. Most bottlers of soft drinks receive a franchise from a company and must use its ingredients to produce, bottle and distribute the soft drinks.
How do Franchising help Start-ups:
1. Franchising helps in the working of start-ups because the product already carries a name in the market which is otherwise the most difficult to establish. That is why start-ups pay royalty to the franchisor. Franchising offers an established product that saves efforts, time and money involved and hence help start-ups.
2. It is very important that the salesman must know his product. In this case start-ups are the, salesman. Therefore, start-ups take up training to understand the product and franchisors make franchises fully conversant with the product/services that they have to offer. Franchisors charge a fee for this purpose and their motive at every step is ‘Pay and Smile.
3. Start-ups can grow rapidly without having to increase labour cost and other operating costs because generally buyers walk up to them straight away.
4. In practice, Franchises work for the benefit of franchisors. In other words, they turn one plus one in to eleven. They help each other. Franchisor’s efforts to boast his franchises are always sincere, so, there is no clash of interest.
Advantages of franchising—to the franchisor
1. Quick expansion: A franchisor can expand a business nationally and even internationally by authorizing and selling franchises in selected locations. The capital necessary for this expansion is much less than it would be without franchising. Operating a franchised business requires fewer numbers of employees than a nonfranchised business. Headquarters and regional offices can be lightly staffed, primarily to support the needs of the franchisees. This allows the franchisor to maintain low payroll and minimize personnel problems.
2. Cost advantages: The franchisor can purchase supplies in large quantities thus, achieving economies of scale that would not have been possible otherwise. Many franchise businesses produce parts, accessories, packaging and raw materials in large quantities, and then sell these to the franchisees. One of the biggest cost advantages of franchising a business is the ability to commit larger sums of money to advertising. This pooling of resources allows the franchisor to conduct advertising in major media across a wide geographic area.
