IGCSE Business Franchise Quiz

Alex, a sole trader, opened a hair salon three years ago. He has recently changed the main

objective of the business from ‘profit’ to ‘survival’.

What would explain this change of objective?

• The hair salon has already achieved its profit objective

• The hair salon has gained a lot of new customers

• The hair salon is experiencing intense competition

• The hair salon is now an established business

Limited liability protects:

• business owners

• customers

• suppliers

• the local community

Finley and Umi are business partners. They create personalised pictures, using shells and

pebbles. They started the business after attending an art class together.

What would not be an appropriate reason for Finley and Umi to have started this business?

• They developed an idea for a business by making pictures that are unique

• They satisfied the needs of customers looking for sustainable gifts

• They spotted an opportunity to earn money from a leisure activity they loved

• They wanted to test their physical and mental health by working long hours

Which type of ownership is most suitable for an entrepreneur who wishes to start up their own

business quickly and with as little paperwork as possible?

• Partnership

• Private limited company

• Public limited company

• Sole trader

DM plc manufactures canned drinks. The company’s main objective for the coming financial year

is to increase its market share by 2%.

What would help the company achieve its objective?

• Increasing the cost of its canned drinks

• Increasing the number of retail outlets it supplies

• Increasing the price of its canned drinks

• Increasing the time it takes to process orders

Firms A and B both operate in the same industry.

• Firm A’s objective is to make a profit

• Firm B’s objective is survival.

What would explain this difference in objectives?

• Firm A has a low market share and Firm B has a high market share

• Firm B is a start‑up business and Firm A is an established business

• The owners of Firm A have less determination than the owners of Firm B

• The owners of Firm B are more confident than the owners of Firm A

Which of the following is a disadvantage to the franchisor of operating a franchise model?

• Loss of control over the brand image

• Large capital investment required to expand

• Limited customer base

• Need to find new suppliers for each location

What is one main advantage for a franchisee when joining a franchise?

• Complete freedom to set product prices

• No need to pay any fees or royalties

• Access to an established brand and support from the franchisor

• Guaranteed high profit in the first year

What is one advantage to the franchisor of expanding through franchising?

• Full control over all franchised outlets

• Lower risk and investment costs

• All profits go to the franchisor

• Franchisor must manage day-to-day operations

Which of the following is a disadvantage to a franchisee?

• They gain support from the franchisor

• They can choose any product to sell

• They benefit from an established brand

• They must pay royalties or fees