5.1 Franchises

Define what is meant by a 'Franchise'

• A business owned and controlled by one person

• A business owned and controlled by 2-20 people

• A business owned by sharedholders

• A business where the 'franchisor' grants a license to a franchisee to sell their business idea

Define what is meant by a 'Franchisee'

• An individual who has bought a specific number of shares in a company

• A person buying an existing business idea

• The person who owns the business idea

Define what is meant by a 'Franchisor'

• An individual who has bought a specific number of shares in a company

• A person buying an existing business idea

• The person who owns the business idea

Who is in charge of overall decisions relating to the business idea i.e. store layout, logos etc?

• Franchisor

• Franchisee

Describe an advantage to the 'franchisee' of buying a franchise

• The business already exists and has proven success, less risk to the franchisee as there is already a target market

• A more expensive method for the franchisee, since they have to pay an initial fee and royalties.

Describe a disadvantage to the 'franchisee' of buying a franchise

• The business already exists and has proven success, less risk to the franchisee as there is already a target market

• A more expensive method for the franchisee, since they have to pay an initial fee and royalties.

Describe an advantage to the 'franchisor' of operating a franchise.

• The 'franchisor' risks damaging the reputation of the business if the 'franchisee' runs the business badly.

• The 'franchisor' grows the business, with no risk to them, receiving an initial fee and royalty payments

Describe a disadvantage to the 'franchisor' of operating a franchise.

• The 'franchisor' risks damaging the reputation of the business if the 'franchisee' runs the business badly.

• The 'franchisor' grows the business, with no risk to them, receiving an initial fee and royalty payments