Ch3 Franchise - AO3

Question 1

Advantages to franchisor (7)

Answer 1

• fast method of growth
• Cheaper method of growth
• Franchisee take some of the risk
• Franchisees are more motivated than regular employees
• Receive royalties without the responsibility of running the business
• remain in control
• can expand without raising capital

Question 2

Disadvantages to franchisor (4)

Answer 2

• Potential profit shared with franchisee
• Poor franchisees can damage the brand image/reputation
• Franchisees may get merchandise from elsewhere
• Cost of support to franchise maybe high

Question 3

Advantages to franchisee (5)

Answer 3

• less risk – tried and tested idea
  – back up support
  – Predictable set up cost
  – national marketing, maybe organized
  – less risk on setting up

Question 4

Disadvantages to franchisee (5)

Answer 4

– Profit is shared
– Strict contacts must be signed
– lack of independence
– Can be expensive to start
– Never your own boss