FRANCHISES Flashcards
What is a franchise
When a business (the franchisor) licences another individual or organisation (the franchisee) to trade using the franchisor’s name, branding and product range - Considered to be internal organic growth
What does the franchise usually deal with
The franchisee usually deals with: Staffing decisions, maybe they can choose which products they want to and don’t want to sell in their area - The franchisee runs operations of the day to day business.
What industries can you franchise in
You can franchise in multiple different industries, and example would be: McDonalds and Europcar
What is a franchisor
Franchisor - A business that licences other individuals or organisations to trade under their brand image
What are the advantages to a franchisor
Allows for rapid expansion as franchisees provide their own start up capital
Less risky as less requirement to borrow
Franchisees likely to be highly motivated as they bear some of the risk
Can exploit economies of scale
What are the disadvantages to a franchisor
Risk of advantage to brand as franchisee controls their branch
Rapid expansion can be difficult to monitor and manage - impact on standards
Profits shared with franchises
What is a franchisee
Franchisee - An individual or organisation who is licenced to trade under a brand name in exchange for a fee and share of the profits.
What are the advantages to a franchisee
Lower risk of starting a new business under a recognised brand name and existing business model
Consumers are aware of the brand
Assistance and training provided by franchisor
Many tasks undertaken certrally by franchisors, such as marketing. Negotiating with suppliers, and new product development
What are the disadvantages to a franchisee
Lack of autonomy and decision making power in relation to many aspects of the business: product range, sourcing raw materials, branding and marketing
Need to share profits with franchisor
Risk of damage to brand image through the actions of others.
