8.Franchising

Question 1

What is a franchise?

Answer 1

A business model where an owner(the franchisor) allows another operator (the franchisee) to trade under their name.

Question 2

Define the term franchisor

Answer 2

the person or company that allows another to trade under their name

Question 3

Define the term franchisee

Answer 3

the person who purchases the franchise

Question 4

What are the advantages to the franchisee?

Answer 4

-less risk
-backup support is given
-set up costs are predictable
-national marketing may be organized

Question 5

What are the disadvantages to the franchisee?

Answer 5

-shared profit
-no freedom
-lack of independence
-expensive

Question 6

What are the advantages to the franchisor?

Answer 6

-fast method of growth
-cheap
-risk is shared
-franchisees are more motivated than employees

Question 7

What are the disadvantages to the franchisor?

Answer 7

-Profit is shared
-may damage brand’s reputation
-franchisees may get merchandise from elsewhere
-cost of support to franchisee is high