All the information you need on franchises

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  • Created by: Joe Oxley
  • Created on: 22-09-09 20:48
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Section P1 (c)
(vi) Franchises
A franchise is when a business allows someone to sell its goods or services using its trade marks,
brand name, image and system of operation. A fee will be charged for this. A franchise is a way for
a franchisee to start a business with:
Reduced outlay
Reduced risk
An established name, format and product.
Aims of a Franchise:
For the franchiser, the aim is to expand the business without having to take on the debt that this
usually means. For the franchisee, the aim will be to start a successful business by using a tried and
tested business idea. The franchiser is likely to have profit maximisation or taking a maximum market
share as major aims. For the franchisee, a successful business and a reasonable income are likely to
be the targets.
Advantages for the franchiser:
Expansion without the burden of debt.
A regular income
Much smaller workforce than if a branch operation was established.
Control over franchise operations.
Advantages for the franchisee:
There is a low risk involved in franchising.
Selling a product or service that is established and successful
Provision of an exclusive area.
The major disadvantage lies in the amount of control which the franchiser has over the franchisee.
Restrictions placed on the franchisee may make them feel more like managers than independent
owners. However, unlike most managers, successful franchisees are entitled to much of the profit
from their operation and this can be a powerful incentive.
McDonalds, KFC (Kentucky Fried Chicken), The Body Shop, Holiday Inn, Wimpy


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