Transcript Franchising - Brighouse High School

Franchising
Today, you will….
• Understand the principles of a franchise
• Appreciate the advantages and
disadvantages of using franchises
• Identify a suitable start up location for a
franchise
Franchises
A franchise is an arrangement in which an established
business name is sold to an individual or company, who can
then start trading under that name. Many fast food
restaurants such as KFC and Pizza Hut operate franchises.
There are two parties involved in a franchise:
The franchisor: the
business selling the right to
trade its product or service;
The franchisee: the
company or person
buying the franchise.
Franchisee Rules
• You must use the franchisor’s suppliers
• You must use the franchisor’s equipment
• You must follow the franchisor’s rules and
regulations
• You must give a share of your profit or sales
to the franchisor
Why would someone set up a
franchise and become a
franchisee rather than set up
under their own name?
Why would a company offer people
franchises and become a
franchisor?
Why Franchise?
Franchisor
Franchisee
• Gets revenue for simply
selling their name
• Gets expansion without
having to spend
• Starts a business with a
proven product which
should do well. It is less
risky than starting a
business with an
unknown brand
• Makes a profit more
quickly than a normal
new business
But…
• Risks the franchisee
being poor quality and
ruining the reputation
of the brand
But….
• The franchisee has to
pay the franchisor
Benefits of a franchise
•
•
•
•
•
•
Training
Equipment
Materials to use for product/service
Finding customers
Back up services
A brand name
The costs
• Initial start up – average start-up cost is
£250,000
• Then monthly payments - a percentage of
sales
• Franchisors may charge high prices for
their supplies – this affects profit
Advantages & Disadvantages
Advantages
Disadvantages
The franchisor selects people from those
who want a franchise. This eliminates
people who are unsuitable for the job
Initial investment might be high and
payments through the running of the
business may mean low profit
Owners underestimate how much money is
needed to set up a new business. A
franchise has a start-up sum to cover
everything
The franchisee cannot sell the business
without the permission of the franchisor
The franchisee benefits from the
advertising that the franchisor will do
The franchisor can end the franchise
arrangement at any point without reason
A franchisor can offer ongoing support to
the franchisee
Some franchise businesses are more
successful than others
What Franchise is this?
As you enter the restaurant …
All mobile phones and potential sources of
light go in a security locker
Dans le Noir?
• Business is owned by Ethik Investment
Group
• One aim is to create awareness about
disability in France and they promote the
issues affecting people with disabilities
• Dans le Noir? gives able-bodied people the
chance to experience what it is like to be
blind
• Many employees of the Ethik and Dan le
Noir? are registered blind
• Dans le Noir is profitable EVERY year
Dans Le Noir?
A USP (unique selling point) and franchise:
• 10-year franchise
• Initial fee: £40,000
• 4% of turnover every year (with a
minimum of at least £25,000) expected by
the franchisor
• Additional charges for recruitment and
training
Task
If I was thinking of opening a
new restaurant, it would be a
good idea to choose to be a
franchisee for Dans le Noir.
Using “treasoning”, write
down your arguments for
and against the idea.
Then construct your
answer.
Arguments against the idea
Force:
Force:
Force:
Roots
holding
the idea
up
Arguments for the idea
Thick or thin
root?
Thick or thin Thick or thin
root?
root?
Examples
• Restaurant is profitable every year so I
should make money from the restaurant
Big root
• High start-up cost of over £40,000
Force 7
Where would you
locate a Subway?
• Somewhere busy
– more customers
• Easy access –
good transport
links
• Good parking
facilities
Case Study
Page 31 - ‘Over to you’
Answer questions 1-4.
Remember!!
1 mark – 1 minute
Exam Zone….
Turn to page 32 and read ‘you should
know’….
Jot down all the things you are not sure
about.
Have a go at practise exam questions
(Page 33)