Term 1 Topic 1.7 - Ways of acquiring a business Flashcards
Name the 3 ways you can acquire a business
1) Leasing
2) Franchising
3) Outsourcing
Provide ONE word for:
When a specific job is given on contract to another business or person (For example: you outsource to another company to clean The Spur on a daily basis)
Outsourcing
Provide ONE word for:
Authorisation given to a business or person to allow them to do business under a specific brand (For example: The Spur)
Franchise
Provide ONE word for:
A contract in writing between 2 parties where one party gives another party the use of land or equipment in exchange for payment
Leasing
Franchisor: ..(a).. the right to a business
Franchisee: .. (b).. the franchisor
a) owns
b) pays
Lessor: ..(a).. out the property
Lessee: ..(b).. for the lease of the property
a) letting
b) paying attention to
What are the ADVANTAGES to the FRANCHISEE? (person who pays the franchisor)
- lower START-UP costs
- rights to use a WELL-KNOWN BRAND
- franchise financing & TRAINING
- SHARED marketing & advertising
- bigger purchase power
- REDUCED business risk
Name the DISADVANTAGES to the FRANCHISEE (person who pays the franchisor)
- Pays ROYALTIES as % of profits
- COSTLY
- Must follow PRICING of the franchisor
- Cannot EXPAND
- Limits to CREATIVITY
- Franchisor SUPPORT not always available
What are the ADVANTAGES to the FRANCHISOR (business who owns the brand or business)
- Income received in ROYALTIES &
Franchise fees - Expand QUICKLY
- CONTROL your brand
- Not involved in DAY-TO-DAY business
problems - Good MARKETING
- Does not need START-UP capital
What are the DISADVANTAGES to the FRANCHISOR (business who owns the brand or business)
- Constantly managing FRANCHISEES
- High OFFICE running costs
- MARKETING is expensive
- Income is fixed and no control of sales
- Must provide TRAINING
- High RISK of financing a franchise
What are the PROS and CONS of LEASING
PRO’S:
+ Use an expensive asset, without paying
the full amount upfront
+ If it breaks, it will be replaced at no extra
cost
+ Deduct leasing cost as an expense
+ Easy to manage a lease
+ Can return it when not needed anymore
CONS:
- Never owns the asset
What are the PROS and CONS of OUTSOURCING
PRO’S:
+Cost of salaries lower
+Budgeting of costs are easier
+Get specialised skills
+Easily change to another party if service is
not good
CONS:
-Less control over outsourced staff (security
risks)
- Have to depend on another party to
maintain high levels of service
TRUE OR FALSE:
The FRANCHISOR is the individual owner of the supermarket who wants to start trading under the franchise brand
False - it is the francisee
TRUE OR FALSE:
The LESSOR is usually the owner of the building
True
TRUE OR FALSE:
OUTSOURCING is giving a specific job on contract to another business or person
TRUE
TRUE OR FALSE:
An ADVANTAGE of a FRANCHISE is that the brand name is well known so it has high start-up costs.
False - it has low start-up costs
TRUE OR FALSE:
A DISADVANTAGE of a franchise to a franchisee is that it has high national advertising and marketing costs
False - this is a disadvantage to a franchisor
Give ONE reason why a lease is better than buying an item outright for cash
Don’t need to raise the full cash amount upfront
OR
If you don’t need the item, it can be returned
OR
If the item breaks, the lessor will replace or fix it (at no cost)
