The implementation of Foreign Exchange Management Act, 1999 made it very easy for the foreign companies to explore the market of India and grow their business in a comparatively raw market in comparison to other geographic locations. Germany was the first country to introduce the concept of Franchising and it was quickly adopted by the United States of America followed by many other countries. Today, India is among the top marketplaces for goods and services with a tremendous amount of opportunities especially in terms of franchising.
It is true that there are a lot of advantages of franchise business for the franchisee like the low-cost setup, benefits from the already popular brand, proper training, and support from experts and so on. But in many cases, there are a number of drawbacks which can ruin the business completely. In this article, we will discuss those drawbacks in detail.
1. Higher cost: At first, it may look like the cost of setting up a business via franchise is cheaper but in a good percentage of cases, the cost is higher. Apart from buying the franchise, you have to pay the management services fees along with the share of the profit. Apart from that, some franchisors have a particular clause in the agreement that you have to buy the products or the raw material exclusively from them. The logic that franchisors give behind this clause is that they want to keep the quality of the product same at all outlets.
2. Restrictions to modify business model: Most of the franchisors do not allow making any change in the business model. India is a vast market with different working style in different locations. What is good for Delhi may not work in a smaller city. It is very important for the business owner to adopt the style of working as per the local market which is not possible in the case of the franchise.
Diese Geschichte stammt aus der August 2017-Ausgabe von Small Enterprise.
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Diese Geschichte stammt aus der August 2017-Ausgabe von Small Enterprise.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
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Today times are such that firms operate in a dynamic environment and they must act dynamically too, at least firms should keep an eye on obsolete processes and technologies and replace them with updated versions to stay competitively ahead.
