Risk Analysis On Market Expansion Of China's Franchising Enterprises

The conception of franchising firstly appeared in China in 1980s. Compared with other management modes, franchising has some advantages in market expansion. However, there are many serious risks in the process, such as excessive expansion speed, incomplete management system, inappropriate choice of franchisees and so on, which may lead into failure of the whole franchise system. This paper introduces modern risk management theory into the study of franchising management, and analyzes the risks in market expansion of China's franchising enterprises. This paper firstly lays the theoretical framework of risk management and identifies six risks in market expansion of China's franchising enterprises. Secondly,by using the value chain management theory, this paper makes the detailed analysis of these risks. In order to guarantee the long-term development of the franchise system, the following section adopts the financial indices of NPV and IRR to analyze the cash flow statement and supervise the franchisees' financial status. Finally, this paper puts forward specific methods to prevent and control the relative risks.