Franchise

• 2 types
  • Product/trade name franchise
  • Business format franchise (supplies logo/merchandise, management format and marketing supplies i.e. McDonalds)
• Advantages
  • Association with established company
  • Proven business plan
  • Reduced risk of failure
  • Increase chance of profit in 1^st years
  • Easier to access financing
  • Reduced cost of supplies, materials
  • Continuous assistance
  • Possibility of buying an existing operation
• Disadvantages
  • High degree of control / potential disputes
  • Franchisor might not fulfill promises
  • Services provided by franchisor could be more $
  • Franchise fee comes off gross revenue
  • Profits less than represented