The article under consideration concerns franchise opportunities in the coffee industry. It begins by listing the advantages of purchasing a franchise, including access to accurate predictions of one’s sales and expenses, an established customer base, brand recognition, and cost savings (Joiner et al., 2020). All those aspects provide security and opportunities to earn profits (Joiner et al., 2020). The article then notes that Starbucks is not a franchise business and provides an explanation for it, which is an important distinction for a person new to the industry (Joiner et al., 2020). Afterward, the authors discuss the three major businesses and provide the fees, expenses, revenues, and lease terms for each, so that a potential entrepreneur could decide where to invest (Joiner et al., 2020). The article closes with warning remarks regarding the regular nature of payments and the necessity to comply with the franchisor’s established operations (Joiner et al., 2020). Thus, while buying a franchise has clear-cut benefits, they come at a certain price.
As seen in the article, coffee franchises operate on a similar basis, and their fees are close, although the purchasing cost and the projected revenue vary depending on the franchise’s power. For instance, Dunkin’ is the biggest and most established out of the three, so its price is higher than the rest, and it can guarantee better profits (Joiner et al., 2020). However, purchasing it may be so expensive that even the first annual revenue may not cover the expenses, which is not the case for the other two, Biggby Coffee and PJ’s Coffee (Joiner et al., 2020). Thus, the warning at the end of the article is sensible, as aiming for profits may backfire, so a business buyer should approach the deal diligently. Franchises wish to expand, so it is within their interests to draw potential buyers, but they also want to benefit from those deals (Grossman, 2017). What is the usual practice for them may be the first negotiation attempt for the other party, so more caution is needed.
The fees do not seem to pose any ethical issues, as they are based on the franchise’s recognition and industry power. However, not paying them may lead to legal implications, which is a significant element of the relationship between a franchisee and a franchisor (Wang et al., 2020). While the latter is more likely to win the case regardless of the initiator, it will suffer losses, including reputation tarnishing (Wang et al., 2020). The point adds to the already extensive list of the points for a purchaser to consider before the transaction (Hiduke & Ryan, 2013). If they buy a non-franchised business, they may forbid its owner from competing with them and ask for other legally secured guarantees (Hiduke & Ryan, 2013). Meanwhile, a franchise may not be as benevolent, and competing establishments from the same brand situated in close proximity are common. In that case, the franchisor will benefit either way, but the involved franchisees will have to ensure their individual profitability. Perhaps, it is somewhat morally ambiguous, as a franchisee’s value mostly depends on financial results.
The article reveals the beneficial sides of purchasing a franchise business while also signaling potential dangers the initiative may entail. A person may pursue profits, but coffee franchises require any monthly fees on top of depriving one of operational freedom in exchange for those advantages. However, it is worth considering if a non-franchised business might be a valid alternative, as it does not devalue the owner or demand fees in addition to offering certain guarantees and unrestrained decision-making.
References
Grossman, R. (2017). Franchise Bible: How to buy a franchise or franchise your own business. Entrepreneur Press.
Hiduke, G., & Ryan, J. (2013). Small business: An entrepreneur’s business plan (9th edition). Cengage Learning.
Joiner, S., Dittfurth, E., & Lewis, K. (2020). Potential franchise opportunities for entrepreneurs in the coffee industry. Journal of Business and Educational Leadership, 10(1), 134-141. Web.
Wang, J. J., Grünhagen, M., Ji, L. (Jenny), & Zheng, X. (Vivian). (2020). Conflict aftermath: Dispute resolution and financial performance in franchising. Journal of Retailing, 96(4), 548-562. Web.