1.42 Franchising

A franchise is where the entrepreneur buys into an existing business model. Subway and McDoanld’s are examples of well known businesses which offer franchise opportunities.

The established business (franchisor) offers the franchisee the option to setup and run the business in a specific geographical location. There will be set up fee to pay and  each year the franchisee will have to pay the franchisor royalties.

The advantages of setting up a franchise are:

  • you get an established, proven business model
  • you benefit from the existing advertising
  • systems such as stock management are already in place

Read the case study below and then try answering the question which follows.

sally1

sally2

“Sally is considering whether or not to buy a franchise to start up on her own. Justify whether or not Sally should buy a franchise” (9 marks)

Remember, a ‘justify’ question requires context, linked strands and use of business terminology.

Click here to check your answer against the mark scheme.

 

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