Franchising - advantages & disadvantages

Question 1

Franchising:

Answer 1

when a business (the franchisor) gives an individual (the franchisee) the right (the franchisee) to sell a product or provide the service.

Question 2

Advantages to Franchisee:

Answer 2

• receives a regular reward
• concept which has already been developed.
• receive brand name and logo

Question 3

Disadvantages to Franchisee:

Answer 3

• long term contracts
• not completely in control
• cost may become higher

Question 4

Example Franchisors:

Answer 4

subway
dominos
thorntons

Question 5

Opportunity cost:

Answer 5

next best alternative. e.g. giving up their job

Question 6

Benefits of operating a franchise for the franchisor: (5)

Answer 6

receives regular reward
rapid expansion is easier to achieve
speeding up expansion- higher economies of scale
stronger brand awareness.
retains control over the quality of the products and services.