Franchising

• What is franchising?

  Granting a license to trade using a brand
• Who is the franchisor?

  The business selling the franchise rights
• What does a franchisee do?

  Buys the franchise to operate a business
• What must a franchisee pay to the franchisor?

  A proportion of their profits regularly
• What support might a franchisor provide?

  Training, management expertise, and marketing
• Why is buying a franchise beneficial for individuals?

  Less establishment effort than a sole trader
• What are the benefits to the franchisor of using franchising?

  • Classic growth strategy for proven formats
  • Quicker geographical growth with low investment
  • Option to open franchisor-operated locations
  • Franchisee capital investment as growth finance
• What are the benefits to the franchisee of setting up a franchise?

  • Support from franchisor in marketing and training
  • National advertising and established brand recognition
  • Less initial investment due to developed business idea
  • Lower risk of failure with proven products
• What are the drawbacks to being a franchisee?

  • High cost to buy the franchise
  • Ongoing percentage payments to franchisor
  • Less flexibility in business operations
• What can the cost to buy a franchise be described as?

  Can be very expensive
• What does following the franchise model imply for a franchisee?

  Less flexibility in business decisions
• What might a franchisee be told regarding their business operations?

  What prices to set and advertising to use