Franchises?

Question 1

What is a franchise?

Answer 1

A business with a well known brand name(franchiser)lets a person or group of people(franchisee)set up using that brand
It’s not a legal structure in itself(liability depends on how the business is established)

Question 2

What are the 3 advantages of the franchiser(business itself)?

Answer 2

Applicants can be carefully selected for suitability
Products necessary for franchise to operate are under franchisers control
The firm may not have to spend large amounts of money to expand

Question 3

What are the 3 disadvantages of the franchiser(business itself)?

Answer 3

Control issues
The cost of supporting the franchisees may be too high
Possibility of conflict between franchiser and franchisees

Question 4

What are the 3 advantages of the franchisee?

Answer 4

Lower risks
Support advice and training
(National)marketing
Maybe easier to obtain finance

Question 5

What are the 3 disadvantages of the franchisee?

Answer 5

Profit is shared
Franchise fees
Supplies have to be bought from the franchiser
Less control/independence
The business cant be sold without permission

Question 6

Define cooperatives

Answer 6

A business that is owned and run by its members

Profits are shared between members rather than distributed to shareholders

Question 7

What are the 3 advantages of cooperatives?

Answer 7

Legally straightforward to establish
Liability for members is usually limited
Higher quality of service is likely to be provided-as customers are likely to be members
Customers are usually loyal supporters

Question 8

What are the 3 disadvantages of cooperatives?

Answer 8

Capital can be limited
Weak management
Slower decision making
Employees may want more-instead of profit being reinvested to reach the coops’s aims)