FranchiseUnit 1 - Business Structure

Ref Sheet: #U1-01

Franchise:Define…

‘an authorisation to sell a company's goods or services in a

particular place’.

Here are some familiar logo’s...

All Franchise

Benefits to the franchisee...

Costa Coffee Brand

Costa Coffee Brand

FranchiseeFranchisee

What Costa Coffee gives to the franchisee. Branding – the franchisee has the rights to use the company logo and all

merchandise. Marketing – Costa Coffee advertises on bus stops, billboards and provides

the franchisee with promotional goods (buttons, t-shirts etc). Business management support – if the franchisee were to fail, Costa Coffee

as a franchisee would lose out as royalties and an agreed percentage of profits would not be paid to Costa Coffee.

Equipment and products will also be provided alongside the franchise costs.

Royalty: an amount of money the franchisee must pay the franchise every year.

Franchisee: a business person

whom purchases the rights to use

the companies brand image and

authorisation to sell its products

and services.

Branding: exclusive

rights to a distinctive

word or logo used by the

franchisor.

...hungry?

In many cases the consumer would choose a store they recognise...

...where do you choose to eat?Back

Disadvantages to the franchisee...

Financial Commitment:

The franchisee must pay a proportion of profits to

the franchisor. (Can be very high proportion).

Capital required:

The franchisee must

purchase the franchise.

Strict limitations:

Franchise will often limit:

Advertising, pricing and the products sold within

the company

What franchises have you visited this week?

Franchise:From the perspective of the

Costa CoffeeCosta Coffee FranchiseeFranchisee

Benefits to the franchise...

What franchisee gives to the Cost Coffee (franchise). Brand becomes well known from exposure of new stores. They can expand without extensive financial liability due to the franchisee’s

capital input – reduced risk. Earn money from the initial process of franchising the brand.

Loss of control

Care must be taken when choosing

franchisees. Badly run businesses could lead to

brand disruption

No complete financial reward

The franchisee takes a majority percentage of

profit.

Disadvantages to the franchise...

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