Franchises

• Franchiser and Franchisee

  The Franchiser is the business who is already established and they sell the right to another business.

  The Franchisee had the right to trade under their name e.g McDonalds.

  It helps them expand their business.
• Franchiser - Advantages

  • Fast Method of expanding without heavy investment.
  • Provides a steady cash flow from royalty payments.
  • Shared risk between Franchiser and Franchisee.
• Franchiser - Disadvantages

  • Only receives a share of the profits.
  • Poor Franchisee can damage the company's reputation.
  • A weak Franchisee may not return much profit.
• Franchisee - Advantages

  • Reduced marketing costs
  • Reduced risks as the brand is already established.
  • Franchiser may provide training and administration duties.
• Franchisee - Disadvantages

  • Products, price and layout of store may be dictated.
  • A royalty payment must be paid (often a % of revenue)
  • Initial cost is expensive.