Advantages Of Franchising In Malaysia

Introduction

Franchising as a legal or marketing concept was not new when it is wide use commercially started to develop in the late 1940s and 1950s, principally in the USA as well as in other countries (Martin Mendelsohn, 2004). Nevertheless, it is a concept which remains misunderstood by many despite its widespread use. Franchising is not an industry, it is a method of marketing goods and services which knows almost no boundaries in terms of business categories. Franchising has proved over many years in the UK, as well as in the rest of developed world and in many developing countries, that it is a viable method of distributing goods and services which can have a positive influence on economic development by its contribution to the establishment

Franchising is the modern way to raise capital (Ludden and La Verne L, 2000). The cost of franchising is often a smaller investment than the cost of establishing even one new outlet. After paying the cost of the franchise program, the remaining costs of expansion (as well as most of the risk) are assumed by franchisees. However, the right strategy for selling your franchise idea can become an immediate high-impact low-risk revenue source, since franchisees usually pay the franchisor an up-front fee and royalties.

According to the source of Franchise Corporation of Malaysia, franchising can provide the capital for rapid growth, especially if you fit into any of these scenarios:

- If your business does not have the capital, or the people, or even the time to create a company-owned growth system.

- If your business has the potential to grow faster than most company-owned programs.

- If you want to supplement an existing distribution

There are franchises involving transactions between:

- Manufacturers and wholesalers

- Manufacturers and retailers

- Wholesalers and retailers

- Retailers and retailers

Successful examples of franchising

Khera (2001) argued that the success stories in franchising are endless. He believes that McDonalds, Kentucky Fried Chicken, Burger King, Coca Cola, Pizza Hut, Pepsi are only a few of many more examples where franchising has been proven successful. According to the statistics by the International Franchisee Association, the franchise techniques that have developed in the contemporary markets have enabled many companies to succeed internationally through the franchise networks. Some of the industries where franchising has proven to be successful are listed in Table 1.0 below.

Table 1

Franchise category Examples

Food-restaurants and fast food KFC, McDonalds

Motels and hotels Hilton,