Question

Which of the following is a disadvantage of franchising?
a. Franchisors face tariff and nontariff barriers when trying to enter a market.
b. Franchisors face a loss of control when they sell businesses to franchisees who are thousands of miles away.
c. Franchisors face power struggles and a lack of leadership when trying to adapt the franchisee's management practices.
d. Franchisors can eventually become competitors, especially when a licensing agreement includes access to important technology or proprietary business knowledge.

Answer 1

Answer:

The correct answer is b. Franchisors face a loss of control when they sell businesses to franchisees who are thousands of miles away.

Explanation:

Thinking about selling individual franchise rights is a risky decision. Factors such as geographical distance, language and communications and travel costs, among others, make it difficult for a franchisor in practice, however efficient it may be, to provide timely support to the needs of each of its individual franchisees in the Exterior.

In these cases, it is best to do it under the modality of Master franchise. This is the practice most used by large international franchisors to extend their operations beyond their borders.

The Master franchise is a contractual relationship that unites a foreign franchisor with a natural or legal person from the country of destination. Who acquires the Master rights, performs a double function: he is a franchisee before the parent company that sells his Master rights, and at the same time he will be the franchisor before each of the entrepreneurs who buy his individual franchise rights.