Franchise

Meaning of Franchise

Franchising is a business strategy where a franchisor grants a franchisee the right to use its brand name, trademarks, and business model in exchange for fees and royalties. The franchisee operates under the franchisor's established business format and receives ongoing support and guidance.

Features of Franchise

Brand use
Franchise fee and royalties
Support and training from the franchisor
Adherence to operational standards
Territorial rights

Advantages and disadvantages of Franchise business model (Franchisee)

Benefits	Disadvantages/Challenges
Brand recognition and established reputation. Proven business model and operational support. Access to training and ongoing support from the franchisor. Reduced risk compared to starting a business from scratch. Rapid business expansion through franchising.	High initial investment and ongoing fees (franchise fee and royalties). Lack of full control over business decisions and operations. Dependence on the franchisor's brand image and reputation. Restrictions on business operations and innovation. Potential for disputes between franchisees and franchisors.

Multiple Choice Questions

Question 1: What is franchising?

A) A strategy where a company merges with another company

B) A business strategy where a franchisor grants a franchisee the right to use its brand name, trademarks, and business model in exchange for fees and royalties

C) The acquisition of one company by another

D) A partnership between two companies to share resources and risks

Explanation: Franchising is a business strategy where a franchisor grants a franchisee the right to use its brand name, trademarks, and business model in exchange for fees and royalties.

Question 2: Which of the following is a feature of franchising?

A) No support from the franchisor

B) Franchisee operates independently without any guidelines

C) Franchise fee and royalties

D) Complete ownership transfer to the franchisee

Explanation: A feature of franchising is that the franchisee pays franchise fees and royalties to the franchisor.

Question 3: What kind of support does the franchisor provide to the franchisee?

A) Only financial support

B) Support and training

C) No support at all

D) Only marketing support

Explanation: The franchisor provides support and training to the franchisee.

Question 4: Which of the following is NOT a characteristic of a franchise?

A) Brand use

B) Adherence to operational standards

C) Complete independence from the franchisor

D) Support and training from the franchisor

Explanation: Complete independence from the franchisor is not a characteristic of a franchise.

Question 5: What does a franchisee typically pay to the franchisor?

A) Only a one-time fee

B) Only royalties

C) Franchise fee and ongoing royalties

D) No payment is required

Explanation: A franchisee typically pays a franchise fee and ongoing royalties to the franchisor.

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