1. Objective: To understand the elements of a franchise
Franchises
Objective:
To understand the elements of a franchise
Key Words in RED:

2. Franchises cont
An established business (the franchisor) offers for sale to other businesses or individuals (the franchisee) the rights to use its products, services or logos (usually in a specific geographical area).
Usually there is:
An initial set up fee (can be costly)
A % of sales turnover is paid annually (royalty)

3. KEY TERMS
Franchisor – The person or business who offers to franchise to other businesses its trading methods, products and business logos
Franchisee – A person or business buying the franchise
Royalty – A payment made to the franchisor based on the sales turnover of the franchise

4. Franchises cont.....
Franchises have become more popular in the UK in recent years and can be found in most sectors of business activity
Can you think of any well known Franchises?
Prontoprint
Wimpey
Holland and Barrett
The Body Shop

5. Types of Franchise From $600,000 $120,000 $20,000 $450,000 $420,000
$150,000

6. Advantages of Franchises
Gain an established brand name, logos and products which are already known to the customer
Help and guidance – training, advice and products are made available to the franchisee from the franchisor – this reduces the problems with supplies which are necessary to keep the business running
Fixtures included
Spreads the name of the company with little expense
A tried and tested business idea – it reduces the risk of a franchisee losing money

7. Disadvantages of Franchises
Pay a % of the sales back in royalties – profits from sales need to be shared through royalties between the franchisee and franchisor. Potentially, there may not be enough profit made to cover the royalty payment.
Work within strict guidelines
Never your own boss – a franchisee may not have total control of the business. The franchisor may influence how the products are sold and to whom
Could gain a bad reputation through a poor franchisee
All supplies must usually be purchased by the franchisor – this can reduce potential to negotiate the best possible price for your supplies
A large amount of initial capital can be required to buy the most profitable franchise

8. Activity