Practicing Success
Identify the statement that is NOT an advantage of franchising to the Franchisor. |
Quick expansion Continuing cost implication Fewer employees Economics of Scale |
Continuing cost implication |
The correct answer is option (2) - Continuing cost implication. Continuing cost implication is not considered an advantage of franchising to the Franchisor.In fact, due to franchising, the franchisor derives various cost benefits. In a franchise arrangement, the franchisee usually bears the ongoing operational costs, and the franchisor benefits from receiving a percentage of the franchisee's sales as royalty fees. The franchisee is responsible for day-to-day expenses, and the franchisor's revenue often comes from franchise fees, royalties, and initial investments rather than ongoing operational costs. The other options are advantages to the Franchisor as explained below:
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