Royalty fees are fees paid by the franchisee to the franchisor for the use of their brand, Usually a percentage of sales.
The Post office is a well-known franchise. The Franchise is owned by the government so they are the franchisor. Mr and Mrs Rashid bought the franchise, so they are the franchisees.
There are many advantages and disadvantages for the franchisor, The Post Office, and the franchisees, Mr and Mrs Rashid. The advantages for The Post office, is that they get continuous amounts of royalty fees from the franchisee. More Franchisees they gain, are spreading their brand making it more popular and more entrepreneurs may want to also use the brand in future. It also makes the brand recognised bringing a big customer base, more brand awareness. Mr and Mrs Rashid, the franchisees have to pay a one off starting cost to own the rights of the brand. The work is being shared; The Post Office, Franchisor, doesn’t do all the work in the company. The disadvantages are that the franchisor has to trust other people with their business, if something goes wrong in the franchisees behalf the franchisor is affected in some ways e.g. bad press for the brand. The Post Office has to supple Mrs and Mrs Rashid, the franchisees, with supplies and products as well as necessary training and recipes, so that it stays with the brands identity.
There are many advantages and disadvantages for the Mr and Mrs Rashid, the franchisees. The advantages is that there joining a recognise brand which already has a large customer base. There is free advertising from the franchisor which may also bring new customers. Mr and Mrs Rashid could gain a large profit if it does well enough and there is a lower risk of bankruptcy because it is backed up with training, a supply of products recipes and needed services.
The disadvantages are that there could be a lack of experience from Mr and Mrs Rashid may face unlimited liability if the business fails, they would be personally liable for all the debts. There is usually a large one of start-up fee and periodic royalty fees to pay, a percentage of their sales. There is need for own market research, finding out which place would be best suitable for the brand. The franchisee has to share the brand, it doesn’t own the brand and if the franchisor is bankrupt so will the franchisee.
. The main purpose of The Post Office and Mr and Mrs Rashid’s’ business is that it is system for the posting, receipt, sorting and handling transmission for the delaying of the mail, banking and postage stamps, all at a cost to ultimately to make as much profit overall.
The Franchisor currently owns 12,000 post office branches across the UK. There are large stores across the UK and were paid 1.7 billion by the government to make a profit by 2011.Mrs Rashid doesn’t have any employees and she has only ones store. Because this franchise offers a useful service its scale is all around the uk, national. Mrs Rashid has only one store and is at a local scale. Mr and Mrs didn’t mention how much stock/money their turnover.
The post office Brand offers a large variety of services to the British public so this, and Mr and Mrs Rashid’s, business would operate in the tertiary sector.