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Flashcards in Franchises Deck (11):
1

What is franchising?

This is a form of cooperation between two businesses. A company which has a well-know product or service allows an individual to buy the right to use their products or services and trade under their name.

2

What is a franchiser?

The company which allows another person or persons to use their tried and tested product or service and to trade under their name for a fee.

3

What is a franchisee?

The person or persons who pay an initial fee and regular royalty payments for the privilege of trading under the franchiser's name.

4

Who is the franchise owned by?

The franchisee.

5

Who is the franchise controlled by?

The franchiser.

6

Who is the franchise managed by?

The franchisee.

7

Who raises finance for the franchise?

It is raised by savings or borrowings from banks.

8

Who does the profit go to?

The profits are kept by the franchisee but the franchiser takes a percentage in the form of royalty payments.

9

What are the advantages of the franchisee?

- They have a great chance of success as the product has been tried and tested.
- The product is advertised nationally.
- They can receive help and support from the franchiser.
- The franchisee can decide the legal structure of the business.
- It is easier to obtain loans from banks as they are seen as less of a risk.

10

What are the disadvantages of the franchisee?

- They are not completely independent as they have to follow rules and regulations set by the franchiser.
- They can't sell the franchise without the franchiser's agreement.
- They have to give the franchiser a share of the profits (royalty payments).
- The franchiser is not automatically renewed.
- They have to use materials supplied by the franchiser.

11

What are examples of franchises?

Mcdonalds, KFC, Body Shop and Pronto Print.