Franchising Flashcards
What is a franchise?
A franchise is the legal right to use the brand name, products, and business style of an existing business.
Example: McDonald’s restaurants often operate as franchises.
Who is the franchisor?
The franchisor is the individual who owns the business which is being franchised out.
What are the benefits for the franchisor?
Benefits for the franchisor include extra commitment from franchisees, quick market expansion, increased revenues from royalties, shared risks, and relatively cheap expansion.
What are the disadvantages for the franchisor?
Disadvantages for the franchisor include potential damage to reputation from franchisee actions, the need for carefully drawn agreements, challenges in supporting many franchisees, and lack of complete control over daily operations.
Who is the franchisee?
The franchisee is the individual who is buying into the franchise.
What are the benefits for the franchisee?
Benefits for the franchisee include support from national advertising, reduced risk of failure, training and equipment support from the franchisor, and retaining some independence.
What are the disadvantages for the franchisee?
Disadvantages for the franchisee include limited operational freedom, inability to sell the business without permission, potential termination of the franchise by the franchisor, and the obligation to pay royalty fees.
What are the benefits of expanding via franchising?
Benefits of expansion through franchising include existing successful franchises, receipt of royalties, no need for franchisee financing or site finding, quick market expansion, and spreading of risks.
What are the benefits of opening own stores?
Benefits of expansion through opening own shops include retaining independence, controlling expansion, keeping all profits, avoiding training and administration costs, and benefiting from economies of scale.
