Introduction into busienss Flashcards
What is a Franchise?
A franchise is a business with a well-known brand name lets a person or a group of people set up their own business using that brand.
What are the advantages for the franchiser?
The firm does not have to spend large amounts of money in order to expand.
The products necessary for the franchisee to operate are under the franchisers direct control.
What are the disadvantages for franchisers?
If franchisees don’t follow procedures properly, bad publicity from a rogue franchisee could affect the brand name.
High cost of support, the support that franchisers provide such as market research, training and product development can all be very costly to the franchiser.
Conflict, if a product fails to sell a franchisee may blame the franchiser this could lead to court action.
Revenge, if a franchisee fails they may blame the franchiser and disclose confidential information.
What are the advantages to the franchisee?
The franchisee is using a tried and tested brand name so there is a greater chance of success than if they had gone into the same sort of business with their own brand.
Specialist advice and training are available from the franchiser.
The franchiser carries out market research and provides marketing support.
It maybe easier to obtain a loan from a bank because of the factors mentioned above.
What are the disadvantages to the franchisee?
Supplies have to be bought from the franchiser which may charge higher prices than those for similar products on the open market.
There will be continuing royalty payments to the franchiser.
The franchisee has limited control over what it is selling, and how it sells it.
What is a co-operative?
A co-operative is a business that is owned and run by its members. It in itself is not a separate legal entity.
What are the advantages of a co-operative?
Its easy and cheap to set up a co-operative
Employees are expected to be more motivated and therefore more productive as the better the co-operative does the more money they earn.
Limited liability for members generally.
A high quality of service should be provided since customers are likely to be members, and the profit from sales are shared.
What are the disadvantages of a co-operative?
Capital investment may be limited, as investors may see limited returns and banks may be reluctant to lend as co-operatives are not seen as normal businesses.
Stakeholder conflicts may occur when employees want more money instead of it being reinvested into the co-operative.
Slower decision making since there is a greater involvement by members.
What are ways of judging the size of a business?
Number of employees
Number of factories, shops or offices
Turnover and profit levels
Capital employed
What does EU define as a micro business?
Under 10 employees
What does the EU define as a small business?
Under 50 employees
What does the Eu define as a medium sized business?
Under 250 employees
What are the factors affecting the size of a business?
Market size
Nature of a product
Personal preference
Ability to access resources for expansion
What are the three factors EU uses when judging a business size?
Turnover, No. of Employees and Balance sheet total
Why do businesses want to grow?
Owners want a higher return on their investment
Growth through diversification into new markets can help spread risk.
The opportunity to gain unit cost reductions through economies of scale
