Disadvantage of Franchise for Dunkin Donuts, Research Paper Example

The following disadvantages are likely to occur when considering the purchase of a Dunkin Donuts franchise:

The creation of a Dunkin Donuts franchise in an urban metropolitan area could be a challenging premise. It is expected that with an already successful brand name and image such as Dunkin’ Donuts, it may be difficult to exercise any degree of innovation because the brand is already established and is widely successful (Ward). An existing iconic brand image could be difficult to duplicate in a franchise setting with optimal success.

Purchasing a well-known franchise has its disadvantages when there is a desire to innovate and to be creative. With a successful brand such as Dunkin Donuts, it is likely that there will be a high degree of control that cannot be overcome and could create problems for the franchise owners over time (Ward). The franchise owner is unable to make modifications to the existing brand’s business model when the brand is well established.

The originating company and their brand require royalty fees to be paid on a regular basis, which could ultimately cut into existing profits in a significant manner, particularly when the franchise is just getting off the ground (Ward). This could create a problematic set of circumstances for the franchise and its owners as these fees regularly continue to mount (Ward). These fees may cut into any potential profits that the franchise will make, particularly in the early stages.

With many franchises, there is a need to obtain training and education regarding the brand and what it signifies to the consumer, as well as how to conduct business according to the desired model and in the appropriate framework (Ward). However, this is not always available perhaps after the initial training and guidance, which could leave many franchisers in a difficult position to sustain successful operations (Ward). Training must be an ongoing process, but there may be gaps in this training without continued support from the home company.

In order to startup the franchise to begin with, there will be significant startup costs that require capital; therefore, the franchise owners must determine methods to finance these costs accordingly (Ward). Startup costs may be difficult to obtain, particularly if the franchise owner is inexperienced.

At the startup stage, it is also difficult to determine if the franchise will be successful, even if the brand is well-known and has a strong track record (Ward). A well-known brand image does not guarantee a successful franchise business.

A number of factors play into the potential for success, such as the prior experience of the franchise owners, the location(s) of the franchise, economic conditions, and other associated factors (Ward). If any of these dynamics are challenging, this may put a damper on the franchise’s ability to achieve success (Ward). Inexperience may be difficult to manage for a franchise owner in this capacity.

Another challenge to consider is the ability to sustain the brand image, even if the brand has a proven and lengthy track record of success (Conrad). For example, if there is a problem at another franchise location, this could impact the business in an indirect manner, even if there are no problems at the location in question (Conrad). This type of connection to a problem location could place a serious damper on the ability of the new franchise to achieve success (Conrad). Word of mouth and publicity could backfire for the new franchise, even if the business is not even established.

If the business franchise owners in question are new or relatively inexperienced, there could be problems associated with securing funding and in obtaining approval to franchise a very successful brand (Conrad). Some large brands such as Dunkin Donuts may find it difficult to approve a franchise which has no prior experience with the brand or with other successful brands (Conrad). These circumstances could essentially harm the chances of the new franchise from taking off the ground and from being successful over the long term (Conrad).

There are always concerns regarding opening a new franchise of an already existing brand because of the possible disconnect between corporate and franchise values and beliefs. These elements could be at odds with each other and could wreak havoc on any potential success of the business model. This could not only irreversibly harm the franchise owner(s) but also the brand image in a particular location.

The franchise must be effectively prepared to manage the challenges of the franchise and the brand that it is attempting to achieve success with before any final decisions regarding franchising and other required elements are made.

Works Cited

Conrad, Bonnie. Top disadvantages of franchises. Chron-Demand Media. 4 December 2012. http://smallbusiness.chron.com/top-disadvantages-franchises-3899.html

Griffith University. Advantages and Disadvantages of Franchising. Retrieved from images.thewebconsole.com/S3WEB687/files/4c2abc29db2e3.pdf

Ward, Susan. Should you buy a franchise? Franchises can be a shortcut to success. About.com Small Business: Canada. 4 December 2012. http://sbinfocanada.about.com/od/franchiseinfo/a/buyfranchise.htm