September 23rd, 2005
Aaron J Hudson
AMM 101
Dr. Silverman
Chapter 6: Review Questions
13) A franchise is a license to operate an individually owned business as if it were part of
a chain of outlets or stores. A franchisor is the individual or organization that would
grant the franchise. The franchisee is the person of the organization that is purchasing the
franchise.
14) A franchisor gains fast and controlled distribution of its products without incurring
the cost of the construction and operation of its own outlets or stores. The franchisee gets
the opportunity to start a business with limited capital and make use of the business
experience of others. The franchisor provides guidance and advice to the franchisee if
business problems were to occur. In turn, the franchisee provides a high level of
motivation which leads to more sales which then leads to higher royalties for the
franchisor.