One of the growth strategies a small business might consider is becoming a franchisor. Critically assess the advantages and disadvantages of franchising as a growth strategy

Assignment Brief

In this paper, you are required to write an essay on the topic of franchising as a growth strategy that is considered as one of the growth strategies. You have to critically evaluate the pros and cons along with highlighting the two problems that arrives between a franchisor and a franchisee. Moreover, you have to focus on the following points in detail:

• Describe the strategies that could be implemented to resolve the tensions
• Define the complete structure of an essay with relevant references

 Instructions 

Please write an essay with the following title:-

One of the growth strategies a small business might consider is becoming a franchisor. Critically assess the advantages and disadvantages of franchising as a growth strategy and outline two tensions that might arise between a franchisor and a franchisee and what strategies could be used to resolve these tensions?

The answers to Question 2 should be written as an essay with a length of 2000 words. Please remember that when writing an essay you should include an introduction and conclusion and use paragraphs, rather than headings, as the way to divide up your work. Please also use relevant examples when writing your essay which can be from material that we have covered on the course or from elsewhere.

At the end of Question 2 you need to include a reference list for all references that you have referred to whilst answering this question. In addition to using online sources you should also refer to relevant books that have been included in the module handbook, or additional relevant books that you have found.

Sample Answer

Introduction

Franchising is a popular and widely used strategy for business growth, especially for small businesses aiming to expand without taking on significant financial risk. It allows a business owner (the franchisor) to license their brand and business model to another party (the franchisee), who operates their own outlet using the original business’s systems and support. This essay critically examines the benefits and drawbacks of franchising as a growth strategy. It also discusses two common tensions that may arise between franchisors and franchisees, and explores practical strategies to resolve these conflicts. Throughout the discussion, real-world examples and academic references will be used to illustrate key points and provide critical evaluation.

Advantages of Franchising as a Growth Strategy

1. Low Capital Requirement for Expansion

One of the most attractive benefits of franchising is that it allows a business to grow without large financial investments from the franchisor. Instead of using their own capital, franchisors expand their network by allowing franchisees to invest in opening new locations. According to Blair and Lafontaine (2005), this reduces the risk for the original business owner while still enabling rapid growth.

2. Faster Market Penetration

Franchising enables quicker geographical expansion because multiple franchisees can open branches at the same time in different areas. For example, McDonald’s used this model to become one of the world’s largest fast-food chains in a relatively short time. Each franchisee brings local market knowledge, which can accelerate entry into new regions (Justis & Judd, 2008).

3. Motivated Local Operators

Franchisees tend to be highly motivated because they are personally invested in the business. This ownership mindset can result in better customer service, stronger community relationships, and increased sales. Research by Mendelsohn (2004) suggests that franchisees often outperform salaried managers due to their personal financial interest in the success of their outlet.

4. Shared Operational Responsibilities

Franchising reduces the workload of the franchisor by delegating operational responsibilities like staffing, daily management, and local marketing to the franchisee. This allows the franchisor to focus on improving the brand and developing the business model (Stanworth et al., 2004).

Disadvantages of Franchising as a Growth Strategy

1. Loss of Control

A key disadvantage of franchising is the reduced control the franchisor has over day-to-day operations. If franchisees do not follow brand standards or offer poor service, it can damage the brand`s reputation. A well-known example of this is Subway, where inconsistent quality and customer service across different outlets led to customer dissatisfaction in some regions.

2. Risk of Brand Inconsistency

Since multiple people operate under the same brand, there is always a risk of inconsistency in customer experience. If franchisees fail to deliver the expected quality, it may result in confusion or loss of trust among customers (Cox & Mason, 2007).

3. Legal and Regulatory Challenges

Franchising involves complex legal contracts and regulations. Disputes may arise if terms are not clearly defined or if either party feels exploited. According to the British Franchise Association (BFA), about 5–10% of franchises in the UK experience serious legal disputes yearly.

4. Dependence on Franchisee Performance

If a franchisee fails, it reflects poorly on the overall brand and can cause financial and reputational damage to the franchisor. For instance, when a large number of Burger King franchisees in the UK went bankrupt in the early 2000s, it caused a temporary setback for the company’s expansion plans.

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