Franchises

Question 1

3 Advantages for the franchisee

Answer 1

-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 2

2 Advantages for the franchiser

Answer 2

-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 3

2 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

3 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.