Franchise

Question 1

Advantages to the franchiser

Answer 1

1. Low risk form of growth as the franchisee invests the majority of the capital.
2. Relieves a percentage of all the franchisee profits.

Question 2

Advantages to the franchisee

Answer 2

1. A franchise is a well-known business with a customer base
2. Industry knowledge and training is provided by the franchiser
3. The franchisee benifits from national advertisments carried out by the franchiser

Question 3

Disadvantages for the franchiser

Answer 3

1. The reputation of the whole franchise can be tarnished by one poor franchise
2. Only a share of the profits as it would be if they owned a branch

Question 4

Disadvantages for the franchisee

Answer 4

1. There is very little autonomy over decisions as the franchiser decides on the products, store layout and uniform
2. Royalties have to be paid each year
3. They are high in initial start up fees.