Introduction to business - franchises and franchisees Flashcards
1
Q
what is a franchise?
A
- when an established brand name (Franchiser) lets a person or group (Franchisees) set up another shop using that brand name e.g. McDonald’s
- no legal structure in itself and liability depends on how business was established
2
Q
what are the advantages to the franchiser?
A
- firm may not have to spend large amounts of money in order to expand
- quicker to grow inorganically (externally)
- products necessary for franchise to operate are under franchiser control
- applicants can be carefully selected for suitability
3
Q
what are the disadvantages to the franchiser?
A
- reputation may be affected if franchisee does bad job e.g. bad service, dirty store, etc
- loss of control of that particular shop (possibility of conflict)
- training costs to support the franchisee
4
Q
what are the advantages to the franchisee?
A
- support from franchiser (advertising, training, etc)
- reduces risk (brand is already well established)
- marketing is already completed
- profit may come quickly
5
Q
what are the disadvantages to the franchisee?
A
- not as much control/independence
- need to pay franchisee fee and royalty payment
- profit is shared
6
Q
what are some examples of franchises in the UK?
A
- KFC
- McDonald’s
- Domino’s
- Starbucks
- Pizza Hut
- Subway
7
Q
What is a cooperative?
A
- a business that is owned and run by its members (employees and customers)
- Profits are shared between members rather than being distributed to shareholders
8
Q
advantages of cooperatives?
A
- limited liability
- legally straightforward to establish
- a higher quality of service is likely to be provided (as customers are likely to be members)
- customers are likely to be loyal and supportive
9
Q
disadvantages of cooperatives?
A
- capital is limited to what members invest
- weak management (those chosen may not have good principles)
- slower decision making (too much involvement of members)
- employees may want more (instead of profit being reinvested to reach coop aims)
10
Q
define franchise (short definition)
A
the right to use an established brand