p.2 franchises, joint venture, public corp

• Advantages of public corporations

  • Autonomy
  • Protection of public interest
  • Ease of raising funds
• Advantages of franchise to the franchisor


  • Franchisee buys a license from the franchisor to use the brand name
  • Expansion of the franchised business is much faster
  • The management of the outlet is the responsibility of the franchisee
  • All products sold must be obtained from the franchisor
  • Chances of business failure are much reduced
  • The franchisor pays for national advertisement
  • All supplies obtained from the franchisor
  • Training for staff and management is provided by the franchisor
  • Banks are willing to lend loans to franchisee due to relatively low risk and association with a branded business
• Disadvantages of franchise to the franchisee

  • Franchisee keeps the profits from the outlet
  • Less independence than with operating a non-franchised business
  • Unable to make decisions that would suit the local area
  • License fee must be paid to the franchisor and a percentage of annual turnover
• Disadvantages of franchise to the franchisor

  • Poor management of one franchised outlet could lead to a bad reputation for the whole business
  • Less independence than with operating a non-franchised business
  • Unable to make decisions that would suit the local area
  • License fee must be paid to the franchisor and a percentage of annual turnover
• Disadvantages of joint venture

  • Disagreements over important decisions might occur
  • Joint venture partners might have different ways of running a business
  • The expectations set for the joint venture could be unreasonable
• Advantages of joint venture

  • Sharing cost
  • Local knowledge when Joint Venture Company is already based in the country
  • Risks are shared
  • Barriers to competition
  • If the new project is successful, profits have to be shared with the partner
• Advantages of franchise to the franchisee

  • The franchisee keeps the profits from the outlet
  • Less independence than with operating a non-franchised business
  • Unable to make decisions that would suit the local area
  • License fee must be paid to the franchisor and a percentage of annual turnover
• Disadvantages of public corporations

  • No high profits
  • Inefficiency at work
  • Lack of competition
  • Political reasons