Our next task involved research. Amanda and I
knew little about franchising, and thus had lots to learn: How did they work?
What were the pros and cons?
The disadvantage to franchising that would
most significantly affect SWERVE has everything to do with control. When a
company is franchised, the “mother company” loses full control over the outlets
of the chain. Although the franchisor (mother company) can establish
stipulations over the franchise, the franchisee can make decisions that could
ultimately affect the franchisor’s profits. If a franchise saw an increase in
sales, but the franchisee decided to allocate the revenue in a way that
decreases the profits, the franchisor will take less of a royalty. Moreover, the franchisee could blemish
SWERVE's brand and name. For these reasons, Amanda and I agreed that SWERVE
should continue to solidify it's good standing and deepen it's roots in the
Flat Iron district before venturing out to other US cities.
As
soon as SWERVE is ready, it should be franchised. Franchising is low risk, but
a source of easy expansion capital. Without spending much of SWERVE's own
capital, franchisees will open SWERVE studios across the country- and pay for
the costs of developing each individual outlet. While such costs are paid by
the franchisee, SWERVE the franchisor, will take in a percentage of each
outlet's profits.
SWERVE is well on its way to phenomenal
success! We
cannot wait to see how SWERVE evolves and succeeds in the future.
Written by Marshall Rankin and Amanda Trau on May 28, 2014
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