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
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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
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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
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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
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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
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6
Q

what are some examples of franchises in the UK?

A
  • KFC
  • McDonald’s
  • Domino’s
  • Starbucks
  • Pizza Hut
  • Subway
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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
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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
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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)
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10
Q

define franchise (short definition)

A

the right to use an established brand

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