Deductible cap. 3 disadvantages of franchising
- Franchising leads to conflicting goals between franchisors and franchisees.
- Franchising leads to transaction cost problems.
- Franchising makes some forms of innovation and change difficult.
- Franchising can lead to poor financial performance.
|Expansion can happen faster as affiliates ensure staff and sales growth||Franchisees cannot be managed as closely as employees and may have different goals with the franchisor|
- Buying a franchise means that you have a formal agreement with your franchisor.
- Franchise agreements dictate how you run your business, leaving little room for creativity.
- There are usually restrictions on where you do business, the products you sell, and the suppliers you use.
THE ADVANTAGES OF FRANCHISING
Three Types of Franchise Risks
Error. Many entrepreneurs feel the siren of a franchise. Franchisors can make a list of potential problems that can impact profits, cause dissatisfaction, and drive business owners away.
The five main types of franchises are: employment franchise, product franchise, business format franchise, investment franchise, and conversion franchise.
If you’re having trouble with marketing and don’t know where to start when it comes to starting a business, a franchise might not be a bad idea. This is especially true if you feel overwhelmed by all the processes. A franchise that helps you step by step with setup and ongoing support can be a good choice.
Franchise basis. Essentially, a franchisee pays an initial license fee and ongoing license fees to a franchisor. In return, the franchisee receives the use of a trademark, ongoing support from the franchisor, and the right to use the franchisor’s system to do business and sell their products or services.
There are three main types of business organizations: sole proprietorships, partnerships and corporations. A sole proprietorship is a company owned by one person. The advantages are: the owner keeps all profits and makes all decisions.
The sole proprietorship is the most common form of business organization. It is easy to model and gives the owner full control.
Corporations such as partnerships do not have to pay income tax; each partner records the profit or loss of the company in their tax return. This way the company is not taxed separately. Easy to apply. There is a greater ability to raise funds when there is more than one owner.
Benefits of a partnership include:
Pros and Cons of Business
Discounting is the process of determining the present value of a payment or cash flow to be received in the future. If you look at the time value of money, a dollar is worth more today than it will be worth tomorrow. The haircut is the main factor used to evaluate tomorrow’s cash flow.
A corporation is a separate legal entity from its owners.
Businesses enjoy most of the rights and duties of individuals: they can enter into contracts, borrow and borrow money, sue and be sued, hire employees, own assets and pay taxes.