Assessing the Franchise Option Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

By 2005, franchise systems will account for about half of U.S. retail sales. But prospective franchisors should carefully consider whether to expand the business by franchising or opening company-owned outlets. Advantages of franchising include allowing us to overcome the limited resources of limited capital and thin the ranks of experienced managers. Franchising also provides a means of compromise certain features, franchisees are more effective in carrying out the functions, the average cost curve appears fairly quickly. This eliminates the need to monitor (and associated costs), because franchisees have invested their capital and motivated to work for the return. It offers substantial efficiency in promotion and advertising, increasing the value of the trademark and brand. And, of course, it helps to manage the risks of their own, because franchisors can eventually convert profitable franchise locations owned by the company operations (although this strategy raises some ethical issues.) Home firms, however, it is necessary to present their business objectives over a long period and to analyze how it can use franchising to meet these goals. Factors that have a bearing on the desirability of franchise options include working against capital intensity, demand variability, the importance of regular customers, as well as the role of changing technology. The company may well be that the "mixed system" (a mix of franchised and company-owned stores) to optimize the cost-benefit balance. "Hide
by Surinder Tikoo Source: Business Horizons 5 pages. Publication Date: May 15, 1996. Prod. #: BH009-PDF-ENG