Franchises

Question 1

What is a franchise?

Answer 1

A franchise is a business set up with an agreement with a big chain to use their name, for example an individual can set up a business and make an agreement with a company like McDonalds.

Question 2

What are the advantages of running a franchise to the franchisee?

Answer 2

• They have the benefits of an established brand name
• Their brand will already have loyal customers
• The franchiser will provide all equipment from utensils and tables to the paint to decorate with
• Will already have suppliers that are trust worthy working with the brand name
• More likely to succeed than a ‘start up’ business

Question 3

What are the disadvantages of running a franchise to the franchisee?

Answer 3

• It can be expensive to buy into a franchise agreement
• A percentage of all profits has to be paid to the franchisee
• If the franchiser feels that the business is not making enough money or not up to the standard of the brand name they have the right to close it down with little notice
• Franchises are only for a set time period
• Inspections can be done by franchiser at anytime

Question 4

What are the advantages of running a franchise to the franchiser?

Answer 4

• They will receive a fraction of any profit the franchisee makes
• It will help to spread their brand name in wider areas

Question 5

What are the disadvantages of running a franchise to the franchiser?

Answer 5

• If standards in created by the franchisee are bad it could lower the reputation of the brand
• If the franchisee takes it upon themselves to change an aspect of the products sold, it could lower/damage the brands reputation.

Question 6

Why do people set up franchises?

Answer 6

Because it is more likely that they are going to succeed than it would be if they set up an original business from scratch.