Q.State two advantages of franchising.

Franchising limits the franchisee's independence and involves heavy fees and royalties; these are two important disadvantages.

While franchising allows a person to trade under a proven brand and system, it carries drawbacks for the franchisee. Two clear disadvantages:

• Lack of freedom / independence — the franchisee must strictly follow the franchisor's rules, methods, prices and standards, and cannot make his own decisions or change the way the business is run. He is, in effect, controlled by the franchisor.
• High cost — the franchisee has to pay an initial franchise fee and then a continuing share of sales (royalty) to the franchisor, which reduces his own profit and can be a heavy financial burden. …

Franchising lets a franchisee use a proven brand and system; its two main advantages are an established brand/reduced risk and ready training and support from the franchisor.

Franchising is an arrangement where the owner of a business (the franchisor) grants another party (the franchisee) the right to use its brand name, trademark and business system in return for a fee/royalty. It is an important emerging service business in India in the TN HSC Class-11 Commerce syllabus.

Two advantages of franchising (from the franchisee's point of view):

1. Established brand name and lower risk — The franchisee sells under a name customers already know and trust, so sales come faster and the chance of failure is far lower than starting an unknown business from scratch.
2. Ready training, know-how and support — The franchisor supplies proven operating methods, staff training, advertising support and technical guidance, so the franchisee does not have to learn everything by trial and error. …