Session 32 - legal structures Flashcards
What is a franchise
Where a small business owner buys the rights to sell the goods and services of a large, well-established company.
What is a franchisee
This is the small business owner who is buying the rights.
What is a franchisor
This is the large business who are selling the rights e.g. Subway
Advantages of franchising
The franchisor chooses the franchisees carefully – knows what characteristic that make a successful franchisee. The franchisor decides how much money the franchisee must invest in the business. The franchisor provides support – management advice & training – help franchisee solve problems.
Disadvantages of franchising
Franchisee’s do not have freedom of running their own business Bound by rules e.g. Can’t vary product or price. Franchisee cannot sell the business without franchisors permission. Franchisor can end franchise without consulting franchisee. Franchisee pays percentage of profits in royalties. Franchisee will never own the business outright
Define royalty
A payment made to the franchisor based on the sales turnover of the franchise
Define licence fee
the fee paid to buy the franchise and use the brand product and services
What is social enterprise
a business that trades for a social and/or environmental purpose.
What is a lifestyle business
The aim of a lifestyle business is to provide great quality of
life for the owner
What is an advantage of online business
Easy to set up, for example an eBay business could be up and running in an hour after some online form filling
What attributes does a sole trader have
Business owned by one owner. Also known as a proprietor. Can employ people but they will not be involved in control of business. Small businesses. Has unlimited liability
What is a sole trader
A sole trader is when an individual sets up a business on their own and they have unlimited liability.
What is unlimited liability
Unlimited liability occurs when an individual or groups of individuals are personally responsible for all the actions of their business.
Advantages of setting up as a sole trader
Easy to set up – no complicated forms
Make decisions quickly – no agreement needed
Less capital needed
Taxed differently – National Insurance contributions are lower
All profits kept.
Can offer personal attention
Don’t have to make any information about the company public
They are their own boss.
Disadvantages of setting up as a sole trader
Unlimited liability, this means that if the business has financial difficulties the sole trader could lose their own assets like their savings, house or car
Difficult to raise money – seen as a risk
Don’t have economies of scale (buying in bulk)
No one to take over for ill-health or holidays
