A Franchise (Leaving Cert Business): Revision Notes

A Franchise

Setting up a Franchise

Many Businesses such as Subway and McDonalds allow anyone to become a franchisee. They set up their own shop using the established brand name.

• Formation: Requires purchasing a licence from the franchisor, which grants the right to use the brand, products, and business model. Initial fees and ongoing royalties are typically required.
• Liability: The franchisee assumes liability for the operation of their franchised business, including financial and legal responsibilities.
• Finance: Franchisees must secure funding for the initial franchise fee, setup costs, and ongoing operational expenses.
• Control: The franchisor maintains significant control over the business model, branding, and operational procedures. The franchisee must adhere to these standards.

*Subway is a large franchise with thousands of locations *

Advantages of running a Franchise

• Proven Business Model: The franchisee benefits from an established brand and successful business model, reducing the risk associated with starting a new business.
• Market Research and Support: Franchisors provide market research, training, and ongoing support to help franchisees succeed.
• Economies of Scale: Franchisees benefit from bulk purchasing of supplies and materials, often at lower costs, and collective advertising efforts.

Disadvantages of running a Franchise

• High Start-Up Costs: Initial franchise fees and setup costs can be substantial, and ongoing royalties can affect profitability.
• Limited Creativity: Franchisees have limited ability to innovate or alter the business model, as they must follow franchisor guidelines.
• Geographic and Operational Restrictions: Franchisees may face restrictions on where they can sell products and how they operate, limiting flexibility.