How does franchising benefit the franchisor?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The franchisor is the party that sells the right to a franchise.  For example, then, the McDonald’s company is a franchisor while individual store owners are the franchisees.  Some of the most important benefits for franchisors, besides increased revenue, are

Ability to spread.  By selling franchises, the franchisor is able to expand its operations more rapidly than would otherwise be possible.

Guarantee of motivation.  The people who buy franchises are highly motivated to do a good job.  They have invested their own money and have a great deal at stake in creating a profitable business.  They are more likely to be motivated than hired management would be.

Less bureaucracy.  The franchisor can keep their company more streamlined and nimble because they do not need the layers of management that would be required in order to run all the outlets in a huge chain.  Instead, they simply leave the management to the franchisees.

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