IGCSE, A Level Business Student Forum

Q12 Analyse the disadvantages of a franchise for franchisee. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

(kn) contracts aren't permanent
(an) which makes the owner have no senses of security
(an+) leading to uncertainty to invest
(kn) high operating cost
(an)they have to bear the operating cost and pay back to the main company
(an+) leaving them with less revenue

[KN] Costly initial investment
[AN] Franchising often requires a significant upfront investment.
[AN+] The high initial costs can be a barrier for individuals with limited capital or those seeking a more affordable business opportunity.

[KN] Limited Independence
[AN] Franchisees operate under the rules and guidelines set by the franchisor. They have limited flexibility to make independent decisions about the business.
[AN+] This lack of independence can be frustrating for entrepreneurs who want to have full control over their business and innovate as they see fit.

[KN]initial costs and fees
[AN]these costs can include franchise fees, equipment and inventory purchases, and costs associated with setting up the business
[AN+]this initial financial outlay can be a barrier for some individuals, especially those who may not have access to substantial capital or financing options

[KN]potential for disputes with franchisor
[AN]resolving these disputes can be time-consuming, and the franchisee may have fewer resources and bargaining power compared to the franchisor
[AN+]this makes problems in the business to rise and lack of efficiency develops

[KN] Dependent on the franchisor.
[AN] The franchise's success is directly connected to the success of the franchisee.
[AN+] If the Franchisor faces any issues e.g. financial problems, the franchisee faces the same issues and their image and repetition can be affected very quickly.

[KN] Limited Creativity and Innovation.
[AN] Franchisees have limited flexibility in terms of product offerings, pricing, and marketing strategies.
[AN+] They are often required to follow the franchisor's predetermined plans, which may stifle their creativity and innovation.

[KN]limited freedom
[an] FRANCHISEE has to listen to franchisor rule and business model so less freedom to make their own decision ,
[AN+]thus hARD FOR franchisee to earn brand image and to earn revenue,

[KN]high cost
[AN]while bulk buyng can save money franchisee oftn have to pay fees to fanchisor which can be expensive,
[AN+]franchise has to put higher prices in order to get sales revenue ,

ayyan ali wrote: ↑Thu Nov 02, 2023 7:15 pm [KN]limited freedom
[an] FRANCHISEE has to listen to franchisor rule and business model so less freedom to make their own decision ,
[AN+]thus hARD FOR franchisee to earn brand image and to earn revenue,

[KN]high cost
[AN]while bulk buyng can save money franc[/u]hisee oftn have to pay fees to fanchisor which can be expensive,
[AN+]franchise has to put higher prices in order to get sales revenue ,

The further analysis brand image is incorrect.

[KN] High Costs
[AN] Franchisees often have to pay upfront fees, ongoing royalties, and other costs to the franchisor, which can be expensive.
[AN+] thus leading to inefficient control

[KN] Competitive Market
[AN] may face competition not only from other businesses but also from other franchisees within the same brand.
[AN+] thus this can be challenging for the both business and franchisses to achieve quality which is up to the mark

(Kn) high costs (an) since the franchisee not only has to face its day to day expenses but also costs like franchisors cut and such it greatly reduces the money left for the franchisee (an+) this reduces the willingness to invest further and sets the franchisee with less money for other ventures like expansion

(Kn)time consuming due to consultation between the two(an) since both the firms are a significant distance away it becomes harder to communicate (an+) this prooves to be disastrous especially in times of need like changes in demand in which communication takes alot of time

[KN] Sharing profits
[AN] an portion of profit made by the franchise is sand to the franchise owner
{AN+] this would a discouragement for the franchiser that he is not get full award of his efforts

[KN] initial cost
[AN] an amount of money is paid to the franchise owner for owning their franchise.
{AN+] this cost can be very high even higher then starting a own business

[KN] Competitive Market.
[AN] There might be competition in the market from the same brand.
[AN+] This would result in bringing the same franchise into conflict.

[KN] Higher cost.
[AN] Franchisees often have to pay costs to the franchisor which can be expensive.
[AN+] This leads to less chances of growth of the business.

[KN] High costs.
[AN] Franchisee often have to pay costs like franchisor fee, costs related to setting up business to franchise which can be expensive.
[AN+] Thus these expensive operations can lead to lack of opportunity to expand and hinder growth in a profitable manner.

[KN]Limited creative opportunities
[AN] As the existing brand model ,image etc is expanding does not allow innovation to take place.
[AN+] Thus this leads to limited flexibility and does not increase efficiency further.

Kumail Alvi wrote: ↑Thu Nov 02, 2023 1:21 am [KN] Dependent on the franchisor.
[AN] The franchise's success is directly connected to the success of the franchisee.
[AN+] If the Franchisor faces any issues e.g. financial problems, the franchisee faces the same issues and their image and repetition can be affected very quickly.

[KN] Limited Creativity and Innovation.
[AN] Franchisees have limited flexibility in terms of product offerings, pricing, and marketing strategies.
[AN+] They are often required to follow the franchisor's predetermined plans, which may stifle their creativity and innovation.

first analysis point is not giving a clear direction or sense of impact

[kn]Negative advertisement campaigns effects sales of franchised business
[an] In case of any negative campaign against the brand, customer of franchised businesses may also be put off which leads to low revenues
[AN] in worst cases business may have to be shut down


[KN]Less innovation
[AN]Franchisee cannot bring in changes without consulting with franchisor which can be a time taking process
[AN] this can delay final decisions and reduce efficiency

[KN] Competitive Market.
[AN] There might be competition in the market from the same brand.
[AN+] This would result in bringing the same franchise into conflict.

[KN] Higher cost.
[AN] Franchisees often have to pay costs to the franchisor which can be expensive.
[AN+] This leads to less chances of growth of the business.