Franchise is a form of a business organization based on a mutual agreement between the

franchisor who provide products and the franchisee who sell those products or services in a
specific geographical area. From the franchisee’s perspective, there is less risk rather than
starting a new business because franchise businesses are usually having a brand awareness
among the target market. Thus, the franchisee can enter to the market through a large business
with loyal customers and lower tendency to fail. Therefore, the owner does not require to invest
on aggressive marketing which is cost effective. Even though the owner is lack of experience in
engaging in businesses, the franchisor is always willing to provide excellent consultancy with the
intension of supporting the business growth. Moreover, franchisee can expand the business with
the support of external sources such as financial institutions due to the reputation of the business.
Apart, franchisee is able to earn higher profits and own them independently as the franchisor just
required a loyalty fee as per the agreement.

But there are some facts to be considered as owner of a franchise business because franchisee
should expand the business through investing their capital without depending on the franchisor’s
support. Hence, they have to invest on new land and building, employee recruiting process,
conducting training sessions for employees, sharing advertising cost with franchisor accordingly.
These will create unnecessary stress as they have to allocate more time and money on the
business operations to gain company reputation. Even though franchisee owning the business,
they are lack of full freedom in managing and controlling as the franchisor still have the power to
control over business activities. Also, they have to bear the burden of making marketing
strategies to reach the target market. Additionally, there will be an uncertainty in profit
maximization due to social changes, economy downturn, etc. which will affect the progress of
the business. However, owning a franchise business is favorable if the franchisee has a large
capital to invest because it is hard to attract customers when starting a new business. Also,
franchisee is able to maximize profits as they are connected to a franchise network where they
receive raw materials for lower prices from suppliers. Therefore, this decision is more suitable to
gain knowledge about market trends and gain experiences of using techniques which are useful
to gain competitive advantage. For an example, Yum Brand’s purchased Pizza Hut, KFC, Taco
Bell and many more fast food restaurants where the franchisee is granted the permission to use
the name of the franchiser.