Franchises

Matthew Laverick
Mind Map by Matthew Laverick, updated more than 1 year ago
Matthew Laverick
Created by Matthew Laverick about 4 years ago
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Description

Edexcel GCSE business studies - Franchises

Resource summary

Franchises

Annotations:

  • The method of franchising in which companies make competitive bids to be awarded a franchise for a set term is irrelevant at GCSE.
1 Advantages
1.1 Franchisor pays for national advertising
1.2 Franchisor provides equipment
1.3 Banks can be more willing to lend
1.4 Well known name/brand
1.5 Lower risk due to support
1.6 Franchisor already has an existing product line
2 Disadvantages

Annotations:

  • Remember - Franchises DO NOT pay different amounts of tax.
2.1 VERY HIGH startup cost
2.2 Limited flexibility
2.2.1 Cannot set prices, use offers etc.
2.2.2 Franchisor sets uniform etc.
2.2.3 Bound by a contract with the franchisor
2.3 Franchisor takes some of the profits
2.3.1 Used to pay for advertising etc.
3 Likely to be a sole trader
3.1 If a LTD company corporation tax paid

Annotations:

  • ONLY income tax, NI, VAT and Corporation tax exist.
3.1.1 Disadvantages of Limited liability

Annotations:

  • Issue of shares could cause loss of control. Owner does not keep all profits. Aditional taxes paid.
3.1.2 Advantages of Limited Liability

Annotations:

  • If the business fails, the shareholders will not lose more than they invested in the business - a sole trader could lose personal posesions to pay debts.
3.2 Income tax, National Insurance, VAT paid.
3.3 Franchisee VERY UNLIKELY to be a PLC

Annotations:

  • PLCs are large businesses - a franchisee is very likely to be on a small scale, with a few exceptions
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