How do franchise firms benefit from economies of scale

Anton Balazh Today, business is acknowledged to be international and there is a general expectation that this will continue for the foreseeable future.

How do franchise firms benefit from economies of scale

Established brand awareness, reliability, and uniformity are part of the power of franchising. Imagine the time and resources needed to create awareness for an independent, start-up brand.

17 CFR Parts 210 and 240

It would be tremendous. An established franchise brand already is well-known and provides each new franchisee a market presence that is recognizable locally, nationally, and globally. Brand awareness -- typically through coordinated marketing and advertising efforts -- is something a franchisor handles, while you and your fellow franchisees reap the benefits.

Established, successful franchisors will prepare and pay for the development of professional advertising campaigns at the national, regional, and local levels -- a practice that benefits all the franchisees in the system and builds the brand.

Many franchisors also work directly with their franchisees to provide advice and resources to help them develop effective marketing programs for their local area through a cooperative marketing fund you and all of your fellow franchisees have already contributed to the fund through your fees and royalties.

Franchisors also provide marketing materials to their franchisees, as well as marketing guidance starting with initial training and continuing through the length of the franchise agreement.

One of the biggest benefits of owning a franchise is the marketing program, so keep that in mind as you make your franchise selection. From a competitive standpoint, franchising couples market penetration with brand awareness. Economies of Scale Any large organization has built-in economies of scale.

Franchising is no different, and the economies of scale created by the franchisor are available to all franchisees.

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So how do these economies of scale benefit you, the franchisee? For starters, a franchisee can typically buy goods and supplies through the franchisor at a discounted rate -- everything from cleaning supplies and uniforms to food products and ingredients.

Franchisors that purchase products and services for their franchise network have the power to negotiate significant volume discounts from vendors and suppliers.

The end result is a competitive advantage that results in higher operating margins for each franchisee.

How do franchise firms benefit from economies of scale

This power in numbers also benefits other areas of operations, such as marketing and advertising, as described above.

Most independent businesses can only dream about the research and development programs available in many franchise systems. And when you become a franchisee, you gain immediate access to a peer group of franchisees all across the country and world.

Experienced franchisees have faced the same problems and questions that you will face for the first time as a new franchisee. There are many, many strengths franchising offers a business operator.asp notes - Ebook download as PDF File .pdf), Text File .txt) or read book online.

The franchise economy in Middle East and North Africa (MENA) is worth $30 billion and is growing by 27% per annum. High disposable income of consumers, favorable regulations, and a young and upwardly mobile consumer market are the key factors driving growth.

In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation (typically measured by amount of output produced), with cost per unit of output decreasing with increasing scale.

This how-to was excerpted from Start Your Own Business, Grow Your Business and "Selecting the Right Retirement Plan" by David Meier. Type or paste a DOI name into the text box.

Click Go. Your browser will take you to a Web page (URL) associated with that DOI name. Send questions or comments to doi. Benefits. Economies of scale can provide benefits for businesses, consumers, and society at large.

They benefit businesses because they reduce the cost of production, which will lead to more profits and the ability to allocate resources to other ventures. Economies of scale also benefit consumers because they usually result in lower prices.

The MENA Franchising Opportunity and Success Factors | Arab Business Review