IGCSE Business Franchises

What do the logos to the left all have in common?

A franchise is a business that gives the right to another person or business to [blank_start]sell[blank_end] goods or services using its [blank_start]name[blank_end]. It does this by providing the person or other business with [blank_start]a licence[blank_end]. Buying into a franchise is an alternative to setting up a [blank_start]new[blank_end] business. Instead, individuals can buy into an already [blank_start]successful[blank_end] business. To become part of a franchise, a new business must pay a fee. In return, it gets to join the [blank_start]franchise[blank_end] and benefit from using its name, products, training, marketing and equipment. Buying into an [blank_start]already established[blank_end] brand can help to reduce the risk of the business failing for the [blank_start]franchisee[blank_end].

There are some important key terms to remember with franchises: [blank_start]franchise[blank_end] - the right given by one business to another to sell goods using its name [blank_start]franchisee[blank_end] - a business that agrees to manufacture, distribute or sell branded products under the licence of a franchisor [blank_start]franchisor[blank_end] - a business that gives franchisees the right to manufacture, distribute or sell its branded products in return for a fixed sum of money or royalty payment

How does it work A franchise is bought by the [blank_start]FRANCHISEE[blank_end] Franchisee is required to invest [blank_start]money[blank_end] in acquiring the franchise licence and setting up the business (often between £10,000 - £250,000) Once they have [blank_start]purchased[blank_end] the franchise the franchisee has to pay a proportion of their sales ([blank_start]royalties[blank_end]) to the Franchisor on a regular basis e.g. monthly, quarterly etc. This royalty payment MUST be paid regardless of level of sales. Franchisor usually provides support through training, management expertise and [blank_start]marketing[blank_end]. Franchisor may supply some of the materials and equipment to help the [blank_start]franchisee[blank_end] set up.

Some advantages of setting up a franchise are? Select the 3 correct responses

Some DISADVANTAGES of setting up a franchise include? select 5 responses

Franchising is particularly suitable for service businesses?

Which two of the following are benefits for an entrepreneur taking out a home cleaning franchise?

Exam Tip Make sure you don't get confused between the franchisor and franchisee. One way to remember this that is similar to' employer' and 'employee'. The [blank_start]franchisee/employee[blank_end] WORKS FOR THE [blank_start]franchisor/employer[blank_end]

Sally is currently well paid as a fitness instructor and has saved up enough money to start up on her own. She is considering buying a franchise. There are a number of national franchise operators that she could use. However, she is concerned about the current economic climate. She has seen reports that unemployment is rising and that consumer incomes are falling. What financial risks does she face in buying a franchise? (select 2 responses)