Which of the following statement is correct about Franchising 1 The company giving rights is called ...........

Finance (Phase -I & II) Alternate sources of finance

Which of the following statement is correct about Franchising ?

1.The company giving rights is called franchisor and company being given franchise is called franchisee.

2.The franchisor gives the franchisee right to run a local business under the brand name of the franchisor.

3.Franchisee benefits from already established brand name whereas franchisor benefits in terms of business expansion without much investment.

1 and 2

2 and 3

1 and 3

1, 2 and 3

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Explanation:

Franchising:-
1.Under this model the Company which does not have capital to expand, give the franchise rights to an individual or a company. The company giving rights is called franchisor and company being given franchise is called franchisee
2. The franchisor gives the franchisee right to run a local business under the brand name of the franchisor. Franchisee benefits from already established brand name whereas franchisor benefits in terms of business expansion without much investment
3. Franchisor changes the franchisee initial lump sum money and later gets a share in the profit.
4. Franchisor provides franchisee support in terms of guidance, training of employees, marketing etc.
5. Example would be Mc Donald which is going on a franchise model in India. All the petrol pumps from Indian Oil, Bharat Petroleum are also based on this model.