of whether new college graduates should consider franchising as a pathway to ent
ID: 372003 • Letter: O
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of whether new college graduates should consider franchising as a pathway to entrepreneurship. Jeff Elgin said recent college graduates are not ready to be franchise owners. "First, most recent college franchising experts recently debated the issue graduates don't have the financial resources to fund a franchise start-up. Second, many lack the life experience and the motivation to run a business effectively and stick with it when times get tough." ennifer Kushell said franchising is the perfect career choice for many recent college graduates, for sev- eral reasons: (1) the support system that franchising provides is ideal for young entrepreneurs, (2) young ave grown up with franchising and under- stand it well, (3) c launched hus) many college graduates already have eir own, and (4) they think big. Which view do you think is correct 1-8. WhatExplanation / Answer
Before understanding the view points of Jeff Elgin and Jennifer Kushell, the two franchising experts, on franchising as a pathway to entrepreneurship for new college graduates, let us first understand what franchising is all about and how does it function as a business model.
"Franchising is a business arrangement between the two parties in which one party, known as the franchiser, grants another party, known as the franchisee, an access to its brand identities like trademark, logo, brand-name, and also, access to its business systems and processes."
The Franchisee uses these brand elements and systems to produce and market goods as per the specifications and guidelines of the Franchiser company. Franchisee pays a one-time Franchisee fee known as Franchisee Cost to the Franchiser and a percentage of the sales revenue, known as royalty, that it generates from the sale of franchised products.
Jeff Elgin and Jennifer Kushell have different view points on whether the fresh college graduates should consider franchising as a gateway to entrepreneurship or not. While Jeff feels that the college graduates lacks the necessary financial resources and technical skills and life skills required to run the franchise business successfully and effectively, Jennifer counters Jeff’s opinions by saying that young generation have, all their life, grown up with franchising and they understand the model very well. Also, the kind of support the franchising business model provides is immense and enough for them to build and run a successful business.
Although, it is unfair to say which of the viewpoint is correct, whether the fresh college graduates should pursue entrepreneurship in the form of franchising can still be debated. There is no doubt that franchising has its one set of risks and challenges. Like Jeff rightly mentions, the financial capability required to own a franchise is huge and franchisee owners have to pay high franchisee cost ranging in millions to acquire the permission to use brand elements and necessary systems to produce those goods. In addition to the one time franchisee cost that needs to be paid upfront, in most of the cases, the franchiser company also requires that the franchisee owner possesses large real state in high footfall geographic locations so that the prospects of having a good business is high and the risk of the franchiser company, both monetary and reputation, is low. The franchisee costs of some of the world’s highest selling franchisee are given below:
These are just the franchisee i.e. the start up costs. In addition to the start up cost, the franchisee owner also have to pay the overheads like salary, rent (if it does not have a property of its own), electricity bills, monthly royalty on sales revenue to the franchiser company and other miscellaneous expenses. Jeff is right in saying that for a college graduate it is very difficult and risky to invest such high capital in a franchising business.
On the other hand, Jennifer also has a fair opinion in saying that for a fresh college graduate, if he or she is able to make all the necessary financial arrangements required to own a franchise business, there is no better route to get into entrepreneurship than franchising business. Running a franchisee of a renowned company gives following advantages to the new business owners:
The franchise business model has its own advantages and disadvantages, opportunities and challenges and therefore, it is upto the college students to decide what kind of career they wish for themselves.
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