The potential of franchising essay

Part 1

This week I have uncovered the full potential of franchising that was my “aha” moment. Frankly, I underestimated the potential of franchises before because I believed that franchsies is a sort of compromise between the aggressive marketing expansion through the development of the network that was fully controlled by one owner only and business partnership, when the business owner has to come into partnership with others to facilitate the market penetration, for instance. However, this week I have changed my view on franchises. In fact, it is not just a compromise but it is rather a prospective, alternative way of the fast business development, which though is cost-efficient because owner of franchises just grant their brand name and set their standards, while companies willing to purchase the franchise have to meet the corporate standards and operate under the corporate brand.

Part 2

Choosing the option of selling a product line to a competitor is quite good and it is possible to agree with this exit strategy and its justification (Gwynn, 2004). However, it is also worth mentioning the fact that, while selling a product line to a competitor, the owner of the product line can maximize the price because the competitor gains a strategic advantage after the purchase of the product line due to the increase of the market share (Volti, 2005), on the one hand, and decreasing competitive pressure, on the other (Breneman & Taylor, 1996).

As for franchising, this option will not bring as much benefits as selling the product line to a rival but this exit strategy allows the product line’s owner to receive profits for a longer time (Clarke, 2000) that makes franchises a good exist strategy for those product line’s owners, who do not need to earn maximum profits from the product line’s selling right now but prefer to receive smaller profits but for a longer time (Hackman & Wageman 1995).