Question

Advantage(s) to a franchiser in a franchise is/are _______.

• A. capital injection
• B. market penetration
• C. risk sharing
• D. all of the above

Answer 1

Answer: (D)

all of the above

• “Franchising is basically a specialised form of licensing in which the franchisor not only sells intangible property (normally a trademark) to the franchisee, but also insists that the franchisee agrees to abide by strict rules as to how it does business.” Charles W.L. Hill

Advantages include:

• Franchising is, considered a less expensive mode of entering into international business.
  
• Since no or very little foreign investment is involved, franchiser is not a party to the losses.
  
• Since the business in the foreign country is managed by the franchisee who is a local person, there are lower risks.
  

Thus franchiser is the one who provides permission to the third party i.e. franchisee to sell its brand and products in the market. It helps in expanding the market, in sharing the risk and also in capital injection.