Practicing Success

Target Exam

CUET

Subject

Entrepreneurship

Chapter

Enterprise growth Strategies

Question:

Read the passage given below to answer the questions :

A successful food entrepreneur today, Debashish Majumdar belonged to a lower middle class back ground, studied to become a banker. He got his first job as an office assistant. He rose from being an office assistant to the chief accountant and later on pursued a career as a banker with a good salary. After some time he quit his job and the first business he started in 2017, which was an ice cream shop. That did not take off and he made a loss of almost 10 lakh rupees. Idea to start a momo joint came to him when he visited an outlet in Guwahati and felt he could have served better momos. With a loan of about 23.5 lakh with an interest rate of 10 per cent, he launched 'Momomia' is 2018. He ensured that the location was prime to ensure good footfall. That also meant higher rent rate. He started operations with a team of three others. Eventually when he approached investors, he was told his operations were too small to be considered. Monthly sales in the first years were touching about Rs. 1.5 lakh, political turmoil in the state started. The pressure of returning the loan amount was also growing. Gradually situation become better, soon business picked up and in Feb. 2021, first franchise store was opened in Haridwar. Franchise model worked so well for him that he has opened up 55 such franchise outlets in Assam, Arunachal Pradesh, Bihar, Gujrat, Uttar Pradesh and Madhya Pradesh.

'Momomia' provides employment to over 200 people across 50+ outlets. Mean while Momomia's customers can choose from 100 difference kinds of momos.

According to the case main advantage of franchise model for "Momomia" was :

Options:

Cost advantage

Quick expansion

Management expansion

Product acceptance

Correct Answer:

Quick expansion

Explanation:

The advantages a franchisor gains through franchising are related to expansion risk, capital requirements and cost advantages that result from extensive buying power.

In the present case, Momomania has expanded to 55 cities in short period of time. The most obvious advantage of franchising for Momomania is that it has allowed the venture to expand quickly using little capital. This advantage is significant when we reflect on the problems and issues that an entrepreneur faces in trying to manage and grow a new venture. A franchisor can expand a business nationally and even internationally by authorizing and selling franchises in selected locations. The capital necessary for this expansion is much less than it would be without franchising.