Franchising as a start-up option

Overview

What a franchise is, the franchisor and the franchisee, fees and royalties, why a franchise is less risky but costly to start, and how the agreement protects the brand.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is a franchise?

   Model answer

   A franchise is an agreement letting a business trade under another firm's brand and sell its products. The business follows the brand's methods in return for fees.

2. 2

   Who are the franchisor and the franchisee?

   Model answer

   The franchisor is the business that owns the brand and sells the right to use it. The franchisee is the person or business that buys that right.

3. 3

   What payments does a franchisee usually make to the franchisor?

   Model answer

   A franchisee pays an initial fee to join. The franchisee then pays ongoing royalties, often a percentage of sales.

4. 4

   Name two well-known franchises operating in the UK.

   Model answer

   McDonald's and Subway are two well-known franchises in the UK.

5. 5

   Why is a franchise less risky than starting an independent business?

   Model answer

   The franchise uses a brand and product that customers already know and trust. The business model has already been tested in other locations.

6. 6

   How does the franchisor support a franchisee?

   Model answer

   The franchisor provides training, equipment and a proven way of running the business. The franchisor also runs national advertising for the brand.

Other ways to work this

The same content, four other ways.

What is inside Levo

Six ways to work the same material.