Franchises and Multinationals

Question 1

What is a franchise?

Answer 1

A business model that allows people to pay money to own their own branch of the business

Question 2

Aim of a franchise:

Answer 2

Maximise profits, grow and increase market share

Question 3

What is a franchiser?

Answer 3

The main original business

Question 4

What is a franchisee?

Answer 4

The owner of the individual branches of the business

Question 5

Advantages of a franchiser:

Answer 5

• Receive royalties from sales and set-up fee
• Way to grow business with no risk

Question 6

Disadvantages of a franchiser:

Answer 6

• Poor franchises could damage the businesses reputation
• You only receive a share of the profits

Question 7

Advantages of a franchisee:

Answer 7

• Gain the franchisers reputation
• Advertising and marketing may have already been done
• Risk of failure is lower
• Support, training and advise can be given

Question 8

Disadvantages of a franchisee:

Answer 8

• High initial costs
• Must pay a percentage of sales to the franchiser
• Cannot change product range or advertising strategies

Question 9

What is a multinational?

Answer 9

A business that operates in more than one country

Question 10

What is the home country?

Answer 10

The location of the head office in the business

Question 11

Advantages of a multinational:

Answer 11

• Wage and raw material costs can be lower
• Efficiently reach target market (lower carbon footprint)
• Grants may be issued by government to locate to certain countries
• Can avoid taffies (tax on import and export)
• Can hire locals (to receive insider feedback) or other employees to increase the talent pool

Question 12

Disadvantages of a multinational:

Answer 12

• Language barrier (slow communication)
• Culture differences effect production
• Time differenced (slow communication)