franchise

Question 1

Advantages for the Franchiser:

Answer 1

A low-risk form of growth as the franchisee invests the majority of the capital.
Receives a percentage of all franchisee’s profits for each year (called royalties).

Question 2

Advantages for the Franchisee

Answer 2

The franchise is a well-known business with an existing customer base.
Industry knowledge and training is provided by the franchiser.
The franchisee benefits from national advertisements carried out by the franchiser.

Question 3

Disadvantages for the Franchiser:

Answer 3

The reputation of the whole franchise can be tarnished by one poor franchise.
Only a share of profits is received rather than all profits as it would be if they owned each branch.

Question 4

Disadvantages for the Franchisee

Answer 4

There is very little autonomy over decisions as the franchiser decides on products, store layout and uniforms etc.
Royalties have to be paid each year.
There are high initial start-up fees.