CASE STUDY:
THOUGHT IT WAS SAFER THAN STARTING HIS OWN BUSINESS
1. Is Fred ill-suited to be a franchisee, or, perhaps, did he just not understand
what he was getting into at the contract signing?
Answer: Based on this scenario, it can be considered that Fred is unaware of the
franchise model, which requires cooperation between the franchisor and the franchisee
to be successful in the market. Both are business owners in their own right, but
franchisees must strictly stick to the franchise agreements and accept the franchisor's
assistance.
2. Could Fred’s misconceptions be common among franchised business
owners?
Answer: Yes. Fred's misconceptions are typical among franchised business owners
because becoming a franchisee differs significantly from managing independence
once, especially in terms of management.
In the role of a franchisee, Fred is required to cling to all directives provided by the
franchisor. In contrast, as an independent business owner, Fred are free from making
decisions according to his preferences. This distinction arises from the comparison of
franchise business and independent business. When one invests in a franchise, one
may encounter certain disadvantages, such as challenges in termination, renewing,
selling, or transferring the business, with the franchisor having the authority to
terminate the agreement. Conversely, when embarking on an independent business
venture, as long as one maintains financial stability, they enjoy complete autonomy in
selling or disposing of the business, without anyone else holding the right to terminate
the business.
3. What could Fred have done prior to signing the contractual agreement to
better inform himself about the business relationship?
Answer: Fred must discover more about franchise enterprises and the relevant legal
documents, such as franchise agreements. When thinking about purchasing a franchise
or possibly franchising your company, there are two key factors that you should
carefully evaluate before deciding. A key component of franchising is adhering to a
successful concept, and the franchise package helps to ensure this. In addition to the
operation manual, legal agreements, disclosure documents, recruiting and selection
programs, and training programs, the franchisee should be familiar with the franchise
agreement.
4. What should Fred do now, if anything?
Answer: Fred should consider carefully whether he wants to close the franchise and
pursue another business project or keep it going. That's because he wants to live a
semi-retired lifestyle. He seems to be capable of managing the franchise firm, though.
If Fred wants to keep running the business, he can find a business consultant to seek
guidance and help him make the right choice.