franchising

• what is a franchisor

  they sell (give) the rights (license) to the franchisee to operate the business under the franchisor’s brand name
• advantages of being a franchisee

  -chances of business failure are less due to well known brand name

  -franchisor pays for advertising

  -all supplies are obtained from a central source (the franchisor)

  -fewer decisions to make as prices, store layout will be decided by the franchisor

  -training for staff and management is provided by the franchisor

  -banks are willing to lend to franchises due to relatively low risk
• disadvantages of being a franchisee

  -less independence than with operating a non-franchised business

  -licence fees must be paid to the franchisor and possibly a percentage of the annual turnover

  -unable to make decisions that would suit the local area (new products, etc)
• disadvantages of being a franchisor

  -franchisee keeps the profit made

  -poor management of one franchised outlet could lead to a bad reputation for the whole business
• advantages of being a franchisor

  -the franchisee buys a licence from the franchisor to use the brand name

  -expansion of the franchised business is much faster than if the franchisor had to finance all outlets

  -the management of all the outlets is the responsibility of the franchisee.

  -All products sold have to be bought from the franchisor