franchises

Question 1

advantages for a franchiser

Answer 1

a low risk form of growth as the franchisee invests most of the capital

Question 2

advantages for franchisee

Answer 2

the franchise is a well known business with an existing customer base

Question 3

disadvantages for the franchiser

Answer 3

the reputation of the entire franchise can be tarnished by one poor franchise

Question 4

disadvantages for the franchisee

Answer 4

there is very little autonomy over decisions as the franchiser decides on products, store layout, uniforms etc

Question 5

main aims for franchises

Answer 5

1. growth
2. increase market share
3. profit maximisation
4. increase market value (if PLC)

Question 6

what is a franchise

Answer 6

a business model that allows businesses to pay a sum of money to own a branch of a well known, existing business

Question 7

difference between franchiser and franchisee

Answer 7

franchiser - original business

franchisee - individual branch

Question 8

advantage of franchiser

Answer 8

receives a percentage of all franchisee’s profits each year, known as royalties

Question 9

disadvantage of franchiser

Answer 9

only a share of profits is received rather than all profits as it would be if they owned each branch

Question 10

advantage of franchisee

Answer 10

industry knowledge and training is provided by the franchiser

Question 11

disadvantage of franchisee

Answer 11

royalties have to be paid each year

Question 12

advantage of franchisee

Answer 12

the franchisee benefits from national advertisements carried out by the franchiser

Question 13

disadvantage of franchisee

Answer 13

there are high initial start up fees