Mohit is a successful business man. He is producing fried chicken by using a secret recipe. Now he has decided to give the franchise of his business to 20 people all across the state. He has to make more raw material to make the packets of the secret recipe, for the franchisee. Identify the advantage Mohit will receive by producing more packets of his secret recipe.

Cost advantage

The correct answer is option (3) - Cost advantage.

The advantage Mohit will receive by producing more packets of his secret recipe for the franchisees is "Cost advantage." Producing in larger quantities often leads to economies of scale, which can result in lower per-unit production costs. This cost advantage can contribute to increased profitability for Mohit's business, especially when supplying raw materials for multiple franchisees.

Cost advantages :The mere size of a franchised company offers many advantages to the franchisees. The franchisor can purchase supplies in large quantities, thus achieving economies of scale that would not have been possible otherwise. Many franchise businesses produce parts, accessories, packaging and raw materials in large quantities, then in turn sell these to the franchisees. The franchisee are usually required to purchase these items as part of the franchise agreement and they usually benefit from lower prices. One of the biggest cost advantages of franchising a business is the ability to commit larger sums of money to advertising. Each franchisee contributes a percentage of sales (1 to 2 %) to an advertising pool. This pooling of resources allows the franchisor to conduct advertising in major media across a wide geographic area. If the business had not been franchised, the company would have to provide funds for the entire advertising budget.