10 Questions
What is the main benefit for the franchisor in terms of revenue?
Monthly royalties paid by the franchisee
What is a potential risk for the franchisor due to the franchisee's actions?
The franchisee may not operate in a satisfactory manner
Why is it important for the franchisor to carefully draw up the franchise agreement?
To prevent disputes from occurring
What is a disadvantage of franchising for the franchisor in terms of control?
The franchisor has limited control over the day-to-day running of the business
What is a benefit of franchising for the franchisor in terms of expansion?
Expansion can be achieved relatively cheaply
What must be paid by the franchisee even if they make a loss?
Monthly royalties
What is a potential consequence of poor recruitment, support, and servicing of franchisees?
Dissatisfaction and poor practices
Why is it important for the franchisor to have a well-drafted franchise agreement?
To avoid disputes
What is a potential drawback of franchising for the franchisor in terms of the franchisees' operations?
Unsatisfactory operations
What is an advantage of franchising for the franchisor in terms of growth?
Cheap expansion
Study Notes
Benefits for the Franchisor
- Increased revenues through monthly royalties, which are paid regardless of the franchisee's profit or loss
- Rapid market and sales expansion achieved at a relatively low cost
- Shared risks and uncertainty with franchisees
Disadvantages for the Franchisor
- Franchisees may not operate satisfactorily, damaging the business's reputation and leading to bad PR
- Potential disputes arising from poorly drawn-up franchise agreements
- Difficulty in effectively recruiting, supporting, and servicing multiple franchisees, leading to dissatisfaction and poor practice
- Limited control over the day-to-day running of the business
Benefits for the Franchisor
- Increased revenues through monthly royalties, which are paid regardless of the franchisee's profit or loss
- Rapid market and sales expansion achieved at a relatively low cost
- Shared risks and uncertainty with franchisees
Disadvantages for the Franchisor
- Franchisees may not operate satisfactorily, damaging the business's reputation and leading to bad PR
- Potential disputes arising from poorly drawn-up franchise agreements
- Difficulty in effectively recruiting, supporting, and servicing multiple franchisees, leading to dissatisfaction and poor practice
- Limited control over the day-to-day running of the business
This quiz covers the advantages and disadvantages of being a franchisor, including increased revenue, market expansion, and risks and uncertainty sharing.
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