Exam board: OCR

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Franchisor --> license --> franchise

Franchisor (e.g. Dominoes Pizza) allows Franchisee (e.g. "Local Business") to sell products.

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Advantages of a Franchise

  • Still your own business
  • Tested and developed format and brand
  • Advice, support and training
  • Easier to raise finance
  • No industry expertise required
  • Buying power of a franchisor
  • Lower risk of market entery and lower failure rate
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Disadvantages of a Franchise

  • Not cheap! Initial fees and royalties plus commission
  • Restrictions on actions, including selling
  • Problems selling business on
  • Long term rewards for hardwork
  • What happens if a franchisor fails?
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  • Operating Costs
  • Inital fee (£5k - 200k)
  • Service fee, % of profit
  • Mark-ups - buying from franchisor
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