Identify and Discuss Some of the Negative Aspects Associated with Franchises

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Examlex · Accepted Answer

The Answer is Concerns of franchising include the following:
• Financial Issues. Some franchisors may mislead prospective franchisees about earnings opportunities.
• Churning. Unethical franchisors may engage in churning, or attempting to void the contracts of existing franchisees in order to sell the franchise to someone else and collect an additional fee.
• Encroachment. A franchisor is said to encroach on a franchisee's territory when the franchisor sells another franchise location within the market area of an existing franchisee. Franchisors may also compete directly against their franchisees. This can occur when the franchisor opens a corporate-owned store near the franchisee's location or sell products via mail or online.
• Management Issues. The franchise contract can impose limits on the activities of the franchisee, such as limiting sales territories, requiring site approval, imposing requirements regarding the store's appearance, limiting goods and services offered for sale, and limiting advertising and hours of operation.

Identify and Discuss Some of the Negative Aspects Associated with Franchises

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