Franchising is a process for rapid market expansion but it is gaining traction in other parts of the world. Franchising works well for firms that have a repeatable business model that can be easily transferred into other markets.
Any business transaction between parties from more than one country is a part of international business. The buying and selling of goods, product or services across the national boundaries of a country are known as international business.
Franchising is a specialized form of Licensing in which the franchiser not only sells an intangible property to the franchise but also insists the franchise agree to abide by strict rules as to how it does business.
It helps international business in different ways –
- The risk of business failure is reduced by franchising.
- Products and services will have already established a market share. Therefore there will be no need, for market testing.
- One can use a recognized brand name and trademark by franchising.
- The franchisor gives support – usually, as a complete package including training, help set up the business, a manual telling you how to run the business and ongoing advice.
- No prior experience is needed as the training received from the franchisor should ensure the franchise establishes the skills required to operate the franchise.
- A franchise enables a small business to compete with big businesses, more so than an independent small business, due to the pool of support from the franchisor and network of other franchises.
- One usually has exclusive rights in your territory. The franchisor won’t sell any other franchises in the same territory.
- Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.
- You can benefit from communicating and sharing ideas with, and receiving support from, other franchisees in the network.
- Relationships with suppliers have already been established.