Advantages Of Franchising

Introduction

Franchising has always been an effective and efficient means of expanding businesses and there is a firmly established franchise market in the United States and the United Kingdom. Franchising offers several advantages, such as relatively unsaturated markets, transitioning economies, free-trade zones, friendly business laws, and liberalized markets and most of which come from emerging markets. Lots of multinational companies have chosen to franchise as a means to enter the emerging markets because it is governed by a contractual agreement which provides a desirable competitive advantage. (e.g. Paswan and Kantamneni, 2004; Alon, 2004). Trying to Explain the extraordinary growth of restaurant franchising within the United Kingdom

has been proven to be successful through franchising. Annually, franchising accounts for the turnover of over USD$850 billion in America, USD$300 billion in Europe, and USD$130 billion in Australia. International restaurants such as Jamie 's Italian, and Wagamama have used franchising to grow their business in both traditional economies and emerging markets successfully. US-owned restaurants such as McDonald 's, Domino 's Pizza, Dine Equity and IHOP have been at the forefront of international franchising for a long

Franchising offers several of distinct advantages to companies looking to branch into the global markets. Franchising removes the need for the restaurant franchisee to invest capital and other substantial resources into the venture. Franchising makes use of the native know-how and connections made by the franchisee to secure a good location for the restaurant and overcome obstacles with local restaurant registrations and permits. The strategy of franchising will make the franchisee make the bulk of the investment whilst benefiting from the know-how, brand name, trade mark, good name and quality assurance program etc. of the company acting as franchisor. Franchising enables restaurant companies access the required capital to grow the business globally without significant disbursement or external funding. Restaurants could also attract high quality local investors in order franchise the company. Most of these investors are highly sophisticated and also have a great incentive to make the restaurant a success in their local market. The franchisor also has a strong understanding of the local market since they are both within the same market. These means franchising is not only beneficial for growing once business internationally by taking advantage of the capital and significant resources of the local investors, but it also enables the local investor to have