Chapter 5

Question 1

advantages of independent retailer

Answer 1

• more flexibility and control
• easier to manage personal image
• consistency and independence
• strong entrepreneurial leadership

Question 2

Disadvantages of independent retailers

Answer 2

• lack of bargaining power
• labor intensive operations
• over dependence on owner

Question 3

what are chain retailers

Answer 3

they operate multiple outlets under common ownership

Question 4

examples of chain retailers

Answer 4

• macys

- target (using out of the box thinking by selling direct to consumer products as a middle man)

Question 5

advantages of chain retailers

Answer 5

• bargaining power
• efficiency maintained by computerization and warehouse sharing
• defined management philosophy

Question 6

disadvantages of chain retailers

Answer 6

• limited flexibility
• higher investment cost
• complex managerial control
• limited independence among personnel
• excessive standardization due to extreme concern for bargaining power

Question 7

what is retail franchising

Answer 7

a contractual agreement between a franchisor and franchisee

Question 8

how retail franchising works

Answer 8

the franchisee pays an initial fee and a monthly percentage of gross sales in exchange for exclusive rights to sell goods/ services in an area

Question 9

examples of retail franchising

Answer 9

• mcdonalds (also purchases land)
• wingstop
• jazzercise

Question 10

advantages of retail franchising

Answer 10

• low capital required
• acquisition of well known names
• operating / management skills taught
• cooperative marketing possible
• exclusive rights

Question 11

disadvantages of retail franchising

Answer 11

• franchisors may overstate potential
• over-saturation can occur
• contractual confinement
• royalties are based on sales (not profits)

Question 12

leased departments

Answer 12

a space/ department in a retail store that is rented to an outside party

Question 13

example of leased department

Answer 13

gucci in bloomingdales

Question 14

advantages of leased departments

Answer 14

• provides a one-stop shopping to customers
• lessees handle management
• reduces store costs
• provides a stream of revenue

Question 15

disadvantages of leased departments

Answer 15

• lessees may negate store image
• procedures may conflict with department store
• problems may be blamed on department store instead of lessee