Question

Franchising is a type of a. administered system. b. contractual system. c. vertically integrated chain. d. retail-sponsored cooperative. e. corporate system.

Answer 1

Franchising is classified as a contractual system where the franchisee operates a branch of the business following the franchisor's model, paying fees and royalties in return for support and the use of the brand.

Step-by-step explanation:

Franchising is a popular business strategy defined by a contractual relationship between a franchisor, who provides the brand name, business model, and support, and a franchisee, who operates a branch of the business. In this arrangement, franchisees pay initial franchise fees and ongoing royalties to the franchisor. Given the nature of this business structure, franchising is best classified as B. contractual system.

Franchises like McDonald's set a precedent for standardizing services and products across multiple locations. They operate within the free enterprise system of the United States, where the government plays a role in regulating types of business ownership, reflecting the needs of business owners while providing various benefits and challenges.

Unlike sole proprietorships, partnerships, or corporations, franchises provide a unique blend of independence for the operator, combined with the overarching control and guidelines set by the franchisor. This assists in maintaining consistency and quality across all franchised businesses, contributing to a uniformity in business and consumer experiences.

Answer 2

Letter b is correct. Contractual system.

Step-by-step explanation:

A franchise is a business model that assigns the rights to use a trademark, patent, know-how, infrastructure and distribution under a contract that will establish rules of use and regulate the legal relationship between franchisor and franchisee.

This strategic model institutes the standardization of processes and goods or services. It is widely used by consolidated brands in the food, beauty, clothing and other sectors. It is a growing sector due to the great added benefits, there is the greatest chance of success and market share when acquiring a franchise whose image, concept and brand are consolidated and have value for the consumer. There is also risk mitigation in a previously tested business model that provides adequate training and technical support to combine best management and distribution practices.