Most franchise agreements run between 5 20 years what

Most franchise agreements run between 5-20 years. What if you want to transfer your
rights to a family member or sell the franchise to someone else or terminate the agreement?
Poor performance of other franchisees
The poor performance of one franchisee can seriously affect your business as franchisees
are looked as one unit because the implicit message from franchises is that “we are all
alike” for good or bad
Advantages to the franchisor
Expansion with limited capital investment
The franchiser expands his distribution sources with limited equity investment. Fees from the
franchisee provide capital for the franchiser rather than having to borrow from lenders or attract
outside investors.

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Multiple sources of revenue
The franchise fee which is paid when the agreement is signed, a certain percentage of the
franchisee monthly gross revenue and money earned from selling the necessary products
and suppliers to franchisees earn the franchisor money from many sources.
Motivated Franchisees
Try their best to ensure the success of the business which translates to more money of franchiser.
Bulk purchasing
A centralized purchasing of products and supplies allows the franchiser to take advantage
of volume discounts, since they are buying for all the franchise location.
Disadvantages to franchisor
1. Loss of control
Franchisees who do not maintain their business to the required standards reflect poorly not
only on other franchisees but also on the parent company, while the franchiser controls the
business to the extent of the franchise agreement.
Franchisees are still independent business people and franchiser must get permission on
them before any products are changed, added or eliminated.
2. Profit sharing with the franchisee.
3. Disputes may arise over issues such as payment of fees, termination of franchisee
agreement, method s of operation, etc.
4.9 Revision questions
1) Outline the disadvantages of buying an existing business

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2) Highlight the advantages of starting a business from scratch
4.10 Summary
In this lecture you have learnt:
3) The various ways of getting into self-employment
4) Advantages of buying an existing business
5) Disadvantages of starting a business from scratch
6) Advantages and disadvantages of franchising
4.11Suggested reading
Kuratco & Hodgetts: Entrepreneurship theory, process and practice
LESSON 5: IDENTIFICATION OF A BUSINESS OPPORTUNITY
1.1 Introduction

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Welcome to the fifth lesson on Entrepreneurship and Small Business Management. The
lecture deals with the various factors that can help a potential entrepreneur to identify a
business opportunity.