Domestic penetration Essays

Domestic penetration Essays Domestic penetration Essay Domestic penetration Essay The financial section will provide pre-formatted profit and loss statements showing the relevant income and cost headings with guidance on assumptions that will need to be made to put specific values. In addition, there will be associated spreadsheets for cash flow. There may also be a balance sheet with headings for the assets and liabilities (Martin, 2010). Another important thing to conduct is a feasibility analysis which would be beneficial for franchisors to successfully develop enough domestic penetration. An objective franchise feasibility analysis by a recognized expert will highlight the strengths and weaknesses of the underlying business model (Franchise Foundations, 2011). A franchise feasibility study will analyze, grade and prioritize the company on a variety of these and other factors. An objective franchise feasibility analysis will also document what steps, protective measures and documents need to precede the expansion effort (Franchise Foundations, 2011). Many of these can be done in-house by existing personnel with a little outside expertise. This will result in the most efficient use of time and resources. It will also produce the most professional and user-friendly results. After being successful domestically, expanding the business internationally is then achievable but there are important points to remember. Dealing directly with franchisees or by setting up a master franchise and giving that organization the rights to open outlets on its own are some ways how a franchisor may penetrate a foreign country. Sub-franchisees then pay royalties to the master franchisee then remit some to the franchisor. Master franchise system is pertinent for companies who have no confidence towards evaluating franchisees and when it would be expensive to oversee and directly control franchisees’ operations (Daniels et al. , 2007). To ensure success in international markets, franchisors must improve their understanding of the diverse cultural forces at work around the world. Sometimes, a concept will not fit a foreign cultural style at all. For example, a well known American bagel franchisor sold its rights to development in Lima, Peru, without realizing that Peruvians did not eat breakfast (Bardley, 2005). Adaptation to local cultural norms will often be necessary. An American restaurant franchisor allowed its Egyptian franchisees to develop special food products for the menu during the Muslim holy month of Ramadan. In Saudi Arabia and Qatar, where local customs requires the seclusion of women in public places, this franchisor had to alter their restaurants to include family areas that women could visit (Chan, 1994). Hence it is important to know the factors of culture of a target market. Problems and conflict can occur in any commercial relationship, and franchising is no different. Thus, fundamental to the smooth running of a franchise business relationship is a business model that is profitable for both the franchisor and the franchisee. If this is a one-way street, franchise problems will be inevitable. There are still cases when a franchisor and a franchisee end up seeing each other in courts despite the fact that they have already built enough trust and rapport. Thus, after normal dispute resolution procedure that will at first attempt resolution informally, a formal written notice then will be made which will generally include the nature of the dispute, and desired outcome to resolve the dispute, and a timeframe for this to occur. In Australia, under the Franchising Code of Conduct, serious disputes that cannot be resolved between the franchise parties themselves should be referred to mediation (Asia-Pacific Centre for Franchising Excellence, 2011). But to further avoid a thing like this to happen, Berman and Evans (2006) relate that operating arrangements should take into account individual circumstances. Therefore, more franchisors will adopt, or at least experiment with restructured franchise agreements. This restructuring will affect both the terms of purchasing a franchise and the ongoing franchisor-franchisee relationship. As what Bank of America’s Small Business Advisory Service said, â€Å"The extra things that the franchisor agrees to do can be one of the best aspects of a good franchise relationship† (Kursh, 1969, p. 34). Conclusion As a rapidly growing opportunity of growing a business domestically and internationally, business franchising presents its own unique set of problems that need to be anticipated, addressed and should immediately be solved. Through intensive research from various references such as books, magazines, journals and the internet, the researchers identified the most common problems faced by both the franchisor and franchisee and these are: an entrepreneur may become a victim of fraudulent franchises; difficulties when setting up a franchise especially when franchisors do not provide essential assistance to the franchisees; franchisors’ not developing enough domestic penetration first is one problem why many franchises fail abroad; and tensions existing between a large number of franchisors and their franchises can lead to disagreements, conflicts, and even litigation. Detecting problems like these is always the first step required to successful solution. Many franchisors fail here – they are either unable to detect the real cause for the problem or don’t address it in an appropriate way. With the purpose of this paper to present various ways on how to solve these problems especially in a professional manner, the researchers emphasized the following solutions: acquiring all legal documents and conducting careful investigations and survey of existing franchise operators and customers; keeping a strong, effective program of managerial control in a franchise system; preparing a business plan and feasibility analysis to succeed domestically and internationally; having an improved understanding of the diverse cultural forces at work around the world to ensure success in international markets; building rapport between the franchisor and the franchisee the moment they meet for the first time in order to build trust; and in cases when conflicts between a franchisor and franchisee cannot be solved informally, a formal written notice then will be made which will generally include the nature of the dispute, and desired outcome to resolve the dispute, and a timeframe for this to occur. There are much more potential problems a franchisor and a franchisee could face. Rather than seeking readymade solutions, franchisors should learn how to prevent problems from occurring and how to tackle the issue in the best possible way. The strongest weapons in battling problems are the ability to detect problems early on, to teach the team to take action as soon as the problem arise, help all franchisee unit to perform as best as they can. Therefore, being proactive rather than being reactive can greatly help an entrepreneur; he has to do the reacting ahead of time by anticipating what the future will be, and to react accordingly before it actually happens. But in cases of unexpected problems that already caused much problem to a business, it is important to remember not to jump to any conclusions before reaching the root of the problem.