Why might an existing non-franchised business choose to become a Essay

Why might an existing non-franchised business choose to become a franchisor - Essay ExampleThe motive is consistent with the resource apportioning theory that stipulates that organizational units are most productive when tightly get windled (Ashar & Shapiro, 1988), although the new resource-based view of the theory advocates value creation by combining local (or franchisee) and cardinal (or franchisor) advantages (Combs, 2003). The motive was a major driver of franchising among American auto manufacturers in the 1900s (Combs, 2003). The auto manufacturers lacked funds to open dealerships across the country. Their workaround to the problem was to create chains of franchises across the US. The franchisees invested in stocks of vehicles and premises. In return, they enjoyed exclusive marketing territories. Although a business may want a franchise in order to use other passels funds to grow, some scholars have cast doubt over the cherished notion that the ability to expand with star t investing their money and retain control over operations is one of the main reasons firms franchise. Franchisee financial constraints are a major cause of poor relations between the franchisor and franchise and a nemesis to the survival of both (Dada, et al., 2009). If this argument is true then it defeats the logic of the franchisor seeking to expand using the franchisees capital. A number of reasons explain the occurrence of such a situation. First, some franchisees may falsify their financial position in order to meet the stringent requirements of the franchisor. Such falsification of information, coupled with lack of receivable diligence on the part of the franchisor creates a situation where the franchise starts the franchise with inadequate capital. Shortly afterward, the franchise becomes unable to provide the product they set out to provide. Even in the absence of documented cases of this nature, the risk of such a scenario is real. The implication is that a business th at is desirous of adopting a franchise model as a