Small Business Management, 18e


Advantages of the Franchise Model



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Advantages of the Franchise Model

4.1

Concerns About Franchising

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  • Misleading or exaggerated earnings claims by franchisors
  • Opportunity behavior by which the franchisor becomes a competitive threat to franchisees
  • Restrictions on franchisees who desire to liquidate their holdings in favor of alternative investment opportunities
  • Conflicts of interest, such as when a franchisor forces franchisees to be captive outlets for other suppliers owned by the franchisor
  • Churning: terminating a successful franchise operation in order to resell it and gain additional franchise fees
  • Encroachment: locating a new outlet or point of distribution too close to an existing franchisee, causing a material loss of sales
  • Imposing noncompete clauses on franchisees
  • One-sided contracts devised by franchisors
  • The imposition of new restrictions as a requirement of contract renewal
  • Franchisor intimidation of franchisees who attempt to form franchisee associations, seek alternative sources for products, or make other efforts to create a more level playing field


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