Franchises as a Form of Business Start-up Essay

Franchises as a Form of Business Start-up - Essay Example The Franchisee finds it easier to pay the initial and the royalty fees which are way lower than the required capital cost. At a time when the cost has become an important aspect of the business, Franchising has become a winner for international companies that intend to penetrate as many markets as possible in their global business design strategy. McDonald's is among companies that have a franchise in an effort to expand their business within new markets. The organizations have profited from rapid expansion, use of effective business models and reduced cost entering new markets. From this note, franchising has become a popular practice due to its efficiency in business start-up. Â  In the modern business industry, organizations are experiencing pressure to start new businesses in the international market as one way of appealing to bigger geographical space. One major driver for expansionism in business is the saturation of local business markets. Before the 21st century, organization sharply focussed on the expansion of business within the local markets due to the increasing demand for products within such markets. However, the demand in the local markets has reached a plateau phase and organizations can make little profits from these markets (Francois & Wooton, 2010). When demand remains flat, organizations are at the risk of incurring losses as expenses go higher while the profit remains constant (Garg, Priem & Rasheed, 2013). Consequently, organizations are forced to move out of the local markets and consider entering into new markets. Therefore, fall in demand within local countries has forced organizations to consider appealing to a broader geographica l coverage as the only way to remain profitable. Â  Secondly, the upsurge of competition within local markets has motivated organizations to consider launching international business strategies.