Hire a tutor

Why might a business choose franchising as a growth method?

A business might choose franchising as a growth method to expand rapidly with lower financial risk and capital investment.

Franchising is a popular growth strategy that allows businesses to expand their operations without the need for significant capital investment. This is because the franchisee, or the individual who purchases the franchise, typically bears the cost of setting up and operating the new outlet. This can include the cost of premises, equipment, stock, and staff. As a result, franchising can enable businesses to grow more rapidly than they might be able to through other methods, such as opening company-owned outlets.

Moreover, franchising can also reduce the financial risk associated with expansion. If a franchised outlet fails, the financial loss is largely borne by the franchisee, not the franchisor. This can make franchising a particularly attractive option for businesses that are keen to expand but wary of the potential risks.

Franchising can also provide businesses with access to local knowledge and expertise. Franchisees often have a deep understanding of their local market, which can be invaluable when it comes to things like marketing and customer service. This can help to ensure that the franchised outlets are able to meet the needs and expectations of their local customers, which can in turn help to drive the success of the business as a whole.

Furthermore, franchising can also help to increase a business's brand visibility and recognition. Each new franchised outlet is essentially a new advertisement for the business, helping to increase its visibility and strengthen its brand. This can be particularly beneficial in competitive markets, where brand recognition can be a key factor in attracting and retaining customers.

Finally, franchising can also provide a steady stream of income for the franchisor. This is because franchisees typically pay an initial franchise fee, as well as ongoing royalties, which can provide a reliable source of revenue for the franchisor. This can help to support the financial stability and sustainability of the business, making franchising an attractive option for many businesses looking to grow.

Study and Practice for Free

Trusted by 100,000+ Students Worldwide

Achieve Top Grades in your Exams with our Free Resources.

Practice Questions, Study Notes, and Past Exam Papers for all Subjects!

Need help from an expert?

4.92/5 based on480 reviews

The world’s top online tutoring provider trusted by students, parents, and schools globally.

Related Business Management ib Answers

    Read All Answers