Franchising (Edexcel GCSE Business): Flashcards
📚Flashcards
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13 cards from this deck
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Practise the cards
13 cards from this deck
Franchising
Franchising
Business expansion method using established brand & proven model
Franchisor
Franchisor
Original business that owns brand & grants permission to operate
Franchisee
Franchisee
Entrepreneur who purchases right to operate under franchisor brand
Initial franchise fee
Initial franchise fee
One-time payment for the right to operate the franchise
Ongoing royalties in franchising
Ongoing royalties in franchising
Regular payments, typically 4-8% of gross sales to franchisor
Why franchising reduces business risk
Why franchising reduces business risk
Operates under established brand with proven track record
Marketing advantage of franchising
Marketing advantage of franchising
Expensive advertising costs shared across all franchise locations
Established customer base benefit
Established customer base benefit
Immediate access to consumers who already know & trust the brand
High initial investment disadvantage
High initial investment disadvantage
Franchise fees require substantial upfront capital (tens of thousands+)
Limited business freedom in franchising
Limited business freedom in franchising
Must follow franchisor rules on hours, products, pricing, etc.
Ongoing financial obligations issue
Ongoing financial obligations issue
Regular royalties reduce profit margins permanently
Dependency on franchisor performance
Dependency on franchisor performance
Brand problems/negative publicity affects all franchisees
Franchising expansion method
Franchising expansion method
Through licensing rather than direct investment