Franchises, Joint Ventures & Social Enterprises (Cambridge (CIE) IGCSE Business): Revision Note

A ready-made, recognised brand name which is promoted centrally by the franchisor

The franchisor provides training, such as how to make pizzas properly, to ensure consistent quality

Equipment and supplies are provided through the franchisor

The franchisor guarantees an exclusive geographical area or market to the franchisee so competition is limited

Advice, training and the use of software systems

The franchisor may also provide loans, insurance and recruitment support

The cost of purchasing a well-known franchise is likely to be high compared to starting a business from scratch

Core decisions are made by the the franchisor, reducing the autonomy of business owners

Royalties linked to the level of sales must be paid regularly, regardless of profit 

Required materials, supplies or equipment sold by the franchisor may be sold to the franchisee at inflated prices

If the franchisee does not follow strict franchise rules or fails to meet quality expectations, their franchise rights can be removed 

Rapid business growth can be achieved with less financial risk

Earns income from franchise fees and royalties

Expands a business's brand presence without directly managing each outlet

The franchisor has less control over day-to-day operations of each franchise

There is a risk of franchisees damaging the brand's reputation

Time and resources are needed to support and monitor franchisees

Each partner in the joint venture benefits from sharing expertise and resources, such as distribution channels and R&D expertise

Joint ventures are less risky than 'going it alone' if  entering a new market or diversifying

Local knowledge can be accessed when one of the joint venture partner companies is already based in the country

Costs are shared between joint venture companies, which is very important for expensive projects

If the joint venture is successful, profits have to be shared between the partner businesses

Disagreements may occur between managers in both businesses

The objectives of each business may change over time, leading to conflict between joint venture partners

If the joint venture fails, it may need to be dismantled, reorganised or sold, which is likely to take significant time and resources

Provide jobs and support for disadvantaged groups in society, such as the disabled or homeless

Protect the natural world, animals and their habitats, and reduce the impacts of pollution or overdevelopment

Operate the business in a responsible way by treating stakeholders, including employees and suppliers, fairly

Make a profit to invest back into the social enterprise to expand the social work that it performs

Social enterprises often have a good reputation, which can attract highly-qualified employees and encourage customer loyalty

Profit-focused rivals may be encouraged to improve their business practices to better compete with social enterprises

Deserving causes receive much-needed financial support

Social enterprises may face media scrutiny so must ensure they behave responsibly at all times

Profits (surpluses) available for reinvestment are limited as they are shared with members or good causes

Decision-making is often slow, as many stakeholders need to be consulted