(a)Explain two advantages and two disadvantages to Jemi of buying a franchise. Advantage 1: . . . Advantage 2: . . . Disadvantage 1: . . . Disadvantage 2: . . .

Business
IGCSE&ALevel
CAIE
Exam No:0450_s25_qp_23 Year:2025 Question No:1(a)

Answer:

Award 1 mark for each advantage/disadvantage (max 2 advantages/max 2 disadvantages).
Award a maximum of 1 additional mark for each explanation of the advantage/disadvantage of buying a franchise which must be applied to this context.

Relevant advantages might include:
- Risk of business failure to the franchisee is much reduced - because the brand is well-known with people who like eating vegan meals
- The franchisor pays for national advertising - reducing the costs of promotion for the restaurant
- Supplies are obtained from central sources / quality will be assured as already checked by the franchisor - less need to research suppliers of plant-based ingredients
- Fewer decisions to be made
- Training for employees and management is provided/arranged by the franchisor
- Banks may be more willing to lend as risk of failure is lower

Relevant disadvantages might include:
- Less independence than when operating a non-franchise business / franchisor will impose strict controls over what is allowed - which meals to sell
- May be unable to make decisions to suit the local areas - and some local vegetables may be more popular than others nationally
- Licence fee must be paid to the franchisor - costs \(\$ 50000\)
- Local advertising will still have to be paid for by the franchisee
- Royalty payment made to franchisor each year

For example: The risk of business failure is much reduced (1) because the brand is well-known with people who like eating vegan meals (app).

Application could include: restaurant; vegan target market; plant-based ingredients; meals; fruit and vegetables; \$50000; chefs; working 40 hours a week; 12 employees; increasing trend for people eating vegan meals; eating less meat is good for the environment; menus; recipes.

Knowledge points:

1.4.1.1. Sole traders, partnerships, private and public limited companies, franchises and joint ventures
1.4.1.2. Differences between unincorporated businesses and limited companies
1.4.1.3. Concepts of risk, ownership and limited liability
1.4.1.4. Recommend and justify a suitable form of business organisation to owners/management in a given situation
1.4.1.5. Business organisations in the public sector, e.g. public corporations

Solution:

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