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Flashcards in Franchises Deck (11)
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1
Q

What is franchising?

A

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
Q

What is a franchiser?

A

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
Q

What is a franchisee?

A

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

4
Q

Who is the franchise owned by?

A

The franchisee.

5
Q

Who is the franchise controlled by?

A

The franchiser.

6
Q

Who is the franchise managed by?

A

The franchisee.

7
Q

Who raises finance for the franchise?

A

It is raised by savings or borrowings from banks.

8
Q

Who does the profit go to?

A

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

9
Q

What are the advantages of the franchisee?

A
  • 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
Q

What are the disadvantages of the franchisee?

A
  • 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
Q

What are examples of franchises?

A

Mcdonalds, KFC, Body Shop and Pronto Print.