Franchises

Question 1

Advantages to the Franchiser

Answer 1

• A low risk form of growth as the franchisee invests the majority of the capital

Question 2

Advantages to the Franchiser

Answer 2

Receives a percentage of all franchisee’s profits for each year (called royalties).

Question 3

Advantages to the Franchisee

Answer 3

The franchise is a well-known business with an existing customer base.

Question 4

Advantages to the Franchisee

Answer 4

Industry knowledge and training is provided by the franchiser.

Question 5

Advantages to the Franchisee

Answer 5

The franchisee benefits from national advertisements carried out by the franchiser.

Question 6

Disadvantages for the Franchiser

Answer 6

The reputation of the whole franchise can be tarnished by one poor franchise.

Question 7

Disadvantages for the Franchiser

Answer 7

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

Question 8

Disadvantages for the Franchisee

Answer 8

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

Question 9

Disadvantages for the Franchisee

Answer 9

Royalties have to be paid each year.

Question 10

Disadvantages for the Franchisee

Answer 10

There are high initial start-up fees.