Purchasing a Taco Bell franchise is significant in the sense that there are a number of opportunities and the potential for growth and development within the food industry, particularly that of Taco Bell and its competing companies. However there are also a number of disadvantages to this decision such as financial complications and lack of autonomy and adherence to bureaucracy. This paper will explain the advantages and disadvantages of purchasing Taco Bell compared with purchasing or starting a new non-franchised business and will therefore provide recommendations with respect to venture capitalists and entrepreneurs (EC, 2016).
The advantages of opening up a franchise such as Taco Bell in this instance, focus on the fact that the particular business will be heavily regulated and the company already has a number of associations with several banks and financial institutions that will assist with financing and providing overall financial support. Furthermore, Taco Bell is a well known organization that has a good reputation and will be able to provide a high level of over arching management that would be lacking with stores that are not franchised and self owned (EC, 2016). Despite the costs involved, the level of supervision and management received will ensure that the business prospers and that there are a number of goals and guidelines that will be adhered to both by staff and that of supervisors and managers at each franchise store. This is not possible with a store that is not franchised as there is no level of structure or over arching management support system and the owner will need to have some level of independence and initiative to self start the business.
Additionally, a franchise store will already be provided with cliental and other loyal stakeholders that will further assist in making the business and the store in particular highly successful and most significantly, profitable. Whereas with an un-franchised business, clients, customers and other stakeholders need to be acquired and this is one of the largest challenges for any new business. Taco Bell provides the financial security and support that any new business would require and this is pivotal to a new retail store (EC, 2016).
There are some associated disadvantages however that need to be taken into account. The first is that the level of autonomy is lower with a franchise business. There are a certain number of regulations and guidelines that need to be adhered to and basically, everyone who works at the particular store is an employee of Taco Bell. With an individual business, the manager can better control their employees without having to adhere to the guidelines and requirements of the Taco Bell business overall (EC, 2016). This may result in more opportunities being provided and more potential for growth and prosperity particularly when considering that the success of the store can heavily rely on the reputation of the company overall (EC, 2016). For example, if Taco Bell’s business as a company is significantly lowering, then it is unlikely that the particular store will be successful as well. Franchised stores tend to follow the trends of its parent company. Other disadvantages include the exorbitant fees associated with entering into a franchise business such as the franchise fee of up to $42,000 and other ongoing costs that need to be paid directly to Taco bell as a consequence of the agreement (EC, 2016).
In summary, it is recommended that any new business owner first enter into a franchise agreement. Although the fees of signing this agreement are large, the owner has the benefit of receiving extensive support from the parent company and may have some autonomy to make changes and improve the company overall.
- EC (2016). “Taco Bell Corporation.” Retrieved from: http://www.encyclopedia.com/topic/Taco_Bell_Corp.aspx. Accessed on 20th