Outline the characteristics of a franchised business.

by ellouise1997hotmailcom (student)

The last type of business is a franchise. This is the biggest business there is. A franchise is where a large company allows smaller businesses to use their name there are the franchisor and a franchisee. The franchisor allows the use of their business name for an agreed length of time and provides materials, training and advice. The franchisee must provide the money to start their business and the franchisee must make regular payments. An example of a franchise is Subway and Hertz.

Advantages of a franchise is that there is high chance of success as it’s easy to borrow money. Also problems will have been overcome already and a lot of support is available from the franchisor. Furthermore, advertising is organised and paid for by the franchisor which makes work easier. Lastly, franchisees are usually small which means they can work really hard on small details to ensure its good which can benefit sales.

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Disadvantages of a franchise is that is can be removed if it is becoming unsuccessful. Also supplies have to be purchased from the franchisor which can be expensive and they have to make royalty payment to the franchisor. Franchisee cannot make all the decisions and they cannot sell the franchise without permission which can lead to many difficulties.

The entrepreneur will also need to consider different types of markets as well as different ownerships. There are many different types of markets, these include local, regional, national, EU and global. Location is very important to a business. A small business (such as a sole trader) would start in a local market and as they start to be more successful and make more money, they will start to expand to a wider market. They could then move to regional and slowly can work their way up to sell their products globally. A good example of these markets is newspapers. A local newspaper would be the Feltham Chronical and then as it got popular they expanded to regional, with the Burgh of Hounslow. Then they would expand to a national newspaper, then European newspaper then finally a global newspaper.

Once the entrepreneur has decided what type of business they will become and their type of market they will need to devise a business plan. A business plan, is a plan in a detailed document that sets out the future strategy and financial development of a business and how they will achieve their goals. This usually covers a period of several years.

Business plans are very useful and have many benefits. For instance, a business plan can show strengths and weaknesses of the business idea and highlight financial risks involved. Therefore, if there are any issues the business can then find solutions for this before they become an issue. Furthermore, a business plan can help obtain finance. When the business is asking for a loan, the business manager will ask for the business plan, if they don’t have one they won’t get any finance.