| Ralph Emerson’s
interest in buying a franchise of Pipe Dreams
is vulnerable to the advantages and disadvantages
related to any franchise deal. In franchising,
the biggest advantage is that relatively small
investment in relation to the bigger market players
and shortening of the learning curve. Since Ralph
already has an adequate amount of capital, for
him the biggest advantage is the steep learning
curve in the form of trainings and sophisticated
inventory levels. The support of the franchisor
makes a huge difference in terms of market exposure,
innovative and well-tested ideas and experience,
which has trial and error working on the back
end. One other advantage is that the business
expansion takes place in a short period of time.
On the other hand, the biggest disadvantage is
that even after the franchisee is comfortable
in the daily operations, the royalties and fee
are to be paid. Another aspect is that the autonomy
and empowerment may be limited despite the learning
having taken place. Also, the franchisor may take
strategic decisions that affect the franchisee
in a negative way. The franchisee is also governed
by clauses that require limited product/service
offering, renewal requirements, marketing fees
and continuous monitoring which may not be necessary
in a particular case. In short, the franchise
operations are standardized and do not cater for
individual cases and in a small town like Ralph’s
may not be a good idea. As Ralph has capital,
he should study his target market and then put
the ideas that he has for a tobacco shop in action
because the town may not require a huge franchise
like Pipe Dreams. This way, he will be able to
own his business and though the learning curve
may be long, he will be the only one to reap the
benefits.
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