Franchising refers to the practice of trading the right to access and use a company’s brand and business model (Hisrich, Peters and Shepherd, 2013, p. 145). Entrepreneurs are rapidly adopting franchising as a strategy of expansion. It is a very effective method of attracting talented management. Franchising requires substantial financial investment. Consequently, people who are able to fund franchises are perceived as responsible, business savvy and hard-working. In addition, investors in franchises have a great incentive to ensure that the investment pays back. The franchises also remunerate their managers based on profit. These conditions appeal to experienced and competent managers because they are conscious of their ability to perform (Hisrich, Peters and Shepherd, 2013, p. 145). Franchising also instigates rapid growth. The franchise system provides a mechanism for capital to be injected in by individual franchisees (Cummings and Worley, 2014, 128). At times of prosperity, the franchisor receives capital inflows in the form of franchise fees and royalties. In addition, the franchisees bear the cost of putting up new units. Indeed, franchising facilitates the expansion of new firms because the franchisees are willing to commit their funds to new ventures (Hisrich, Peters and Shepherd, 2013, p. 148).
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Franchising is not a faultless model. First, franchises may encounter resistance to change (Cummings and Worley, 2014, 129). Since the franchise system is made of multiple owners with diverse agenda and objectives, introducing change can be challenging. Furthermore, it is difficult for the franchisor to get a blanket acceptance of the change from the franchisees. The franchisor has a legal obligation to treat the franchisees equitably. They can hardly change processes or products without the franchisees’ consent. Changes in a franchise system have to be bargained and renegotiated with all the parties involved (Hisrich, Peters and Shepherd, 2013, p. 155). Franchise arrangements are incapable of responding to market changes promptly. The franchisor is usually detached from the market trends (Hisrich, Peters and Shepherd, 2013, p. 156). In this model of business data on market patterns is collected by the franchisees. Consequently, the data collection process is costly and slow and has no direct benefit to the franchisees. The franchisor gets late and poor market analysis. Franchise models also suffer high unit costs (Cummings and Worley, 2014, 130). Consequently, franchisees are very reluctant to introduce new products until adequate testing has been done. Franchises spend much time and resources on training, promotion and stocking to get a new product to the market. Lastly, franchisors incur high costs in protecting confidential information (Cummings and Worley, 2014, 132). The franchisor has to entrust some business secrets to the franchisees. The full protection of such secrets can only make protection fees to be incurred. The franchisor has to employ professionals to set up comprehensive procedures to protect confidential information.
Sports business comprises of a wide range of activities. It includes, and not limited to, gambling, athletics, recreation, facility developers, among other activities. Sports are major sources of livelihood for many individuals and families. Indeed, sports are a large business with strong brands and brand names (Moore, 2006, p. 68). Sport-related businesses also need franchising owing to the heavy financial investment needed to start and run sporting activities. Franchising would also enable new entrants in the business to access the main brands in the industry (Moore, 2006, p. 68).
Cummings, T., and Worley, C. (2014). Organization development and change. Stamford, CT: Cengage Learning.
Hisrich, R. D., Peters, M. P., and Shepherd, D. A. (2013). Entrepreneurship (9th ed.). Boston, MA: McGraw-Hill Irwin.
Moore, C. W., (2006). Small business management: An entrepreneurial emphasis. Stamford, CT: Cengage Learning.